ORAL ANSWERS TO QUESTIONS

SCOTLAND

The Secretary of State was asked—

Work Programme

John Robertson: What discussions he has had with the Secretary of State for Work and Pensions on the awarding of contracts for the Work programme in Scotland; and if he will make a statement.

Eilidh Whiteford: What weighting was given to the involvement of voluntary sector organisations in the assessment process of tenders of prime contractors for the Work programme in Scotland.

Michael Moore: Over the past year I have had numerous discussions with ministerial colleagues on the development of the Work programme. The Government are encouraging prime contractors to engage voluntary and private sector organisations in the delivery of the programme.

John Robertson: Does the Secretary of State share my concern that the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), may have broken the ministerial code of conduct in awarding the contracts to some companies? Will the Secretary of State make a statement on the matter, and what is he going to do to protect the companies that missed out on the awards that were given out?

Michael Moore: The hon. Gentleman is making a very serious allegation, which my right hon. Friend absolutely refutes. As with any other instance in which people think something inappropriate is happening, there are appropriate channels through which it can be pursued. If there is some evidence on that or any other matter, those channels should be followed.

Eilidh Whiteford: I declare an interest as a non-remunerated director of the charity Turning Point Scotland.
	There has been great unease in Scotland about the tendering process for the Work programme contracts. The tender document clearly outlined the expectation that at least 30% of a prime contractor’s subcontracts should be delivered by voluntary sector providers, and it stated:
	“This will be a key factor in the tender assessment process.”
	Yet the successful bids commit to a mere 8% and 6% voluntary sector delivery respectively. I hope that the Secretary of State shares my concern, and my question to him is simple: what went wrong?

Michael Moore: I acknowledge the hon. Lady’s work in the voluntary sector, and I believe that it has a very important role to play not just in getting people back to work but in many aspects of Scottish life. Let us remember that the Work programme is a step change in the provision of support for people to get back into work. We are determined to ensure that we tackle all the problems that have afflicted different parts of Scotland and the rest of the United Kingdom.
	The invitation to tender document was absolutely explicit about the criteria, and they were the ones against which bids were measured. As far as the future involvement of the voluntary sector is concerned, the two preferred bidders have indicated that they fully intend to engage with the sector.

Mr Speaker: I call Sheila Gilmore, whose question has been grouped with Questions 1 and 9. She is not here.

Angus Robertson: Does the Secretary of State agree that to secure economic recovery, it is important to listen to the views of the job creators so that we minimise the number of people needing support from the Department for Work and Pensions in the first place?

Michael Moore: Of course it is important that as we recover from the terrible economic situation that we inherited, we focus on creating new jobs. That is why we set out in the Budget continued plans to ensure that we keep interest rates low, reduce corporation tax and reduce the burden of national insurance, compared with the previous Government’s plans. We will continue with those measures, to ensure that we rebalance the economy and create more private sector jobs in Scotland and elsewhere.

Angus Robertson: But does the Secretary of State acknowledge the significance of the fact that 200 leading Scottish job creators have today signed a public statement saying that the best approach for the future is to re-elect the Scottish National party Scottish Government, and Alex Salmond as First Minister?

Michael Moore: Funnily enough, I do not agree with the hon. Gentleman on that point. The best approach to the next Scottish Government is to ensure that we have Liberal Democrats at the heart of it, so that we can reinforce the central part that this Government are playing in rebalancing the economy of the UK as a whole. Our agenda for growth is absolutely essential to our recovery from the situation that we inherited.

Ann McKechin: I note that the Secretary of State, in his answer to my written question yesterday, stated that at his recent meeting with Scottish voluntary sector organisations, to which he dragged along the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), he had encouraged the successful bidders to
	“engage effectively with the voluntary sector”.—[Official Report, 3 May 2011; Vol. 527, c. 662W.]
	Will he confirm what he expects that will actually achieve? Can he guarantee that voluntary sector involvement will be more in line with the UK average for the contracts tendered in the Work programme, or is the voluntary sector in Scotland only going to get the crumbs from the table?

Michael Moore: May I first say that I was very pleased to invite my right hon. Friend the Minister of State to the employment gathering in Edinburgh, which was very well attended by representatives of the different stakeholders and by a representative of the Scottish Government? As we made clear at the time, it is our intention to ensure that the voluntary sector is as involved as possible. The two preferred bidders, Ingeus and Working Links, have made it clear that they are going to discuss the role of the voluntary sector in their supply chains. That discussion is ongoing and not yet resolved. Beyond that, there are other streams of work coming out of the Department for Work and Pensions for which the voluntary sector and others will be able to bid.

Ann McKechin: I note that the Secretary of State is still unable to provide us with a figure. Doubt will remain in the voluntary sector, which has suffered a massive drop in income as a result of the Work programme, which offers fewer places than were offered under previous Government-operated schemes. Does he agree that the experience and knowledge of the voluntary sector of the future jobs fund is testament to its strength? Does he agree that Scotland needs a new future jobs fund, so that we can offer places for the thousands of people who are coming out of school and college with nowhere to go?

Michael Moore: I am happy to acknowledge that under the previous Government, of whom the hon. Lady was a member, youth unemployment rose consistently through periods of growth as well as during the recession. I accept that we have a major challenge, which is why I will bring together different employment sector representatives in Irvine in a couple of weeks’ time.
	It is important for all of us that we get the voluntary sector engaged. The future jobs fund was a very costly scheme, and its results do not bear out the hon. Lady’s assertions. It is not the case that it led to sustainable jobs—but the new Work programme will do exactly that.

Universal Credit

Guto Bebb: What discussions he has had with the Secretary of State for Work and Pensions on the implementation in Scotland of the Government’s proposals for universal credit.

David Mundell: The Secretary of State for Scotland and I are in regular contact with the Secretary of State for Work and Pensions on a range of issues concerning implementation of universal credit in Scotland.

Guto Bebb: In Scotland, the public sector accounts for about 50% of gross domestic product. If we are to succeed in making the country less dependent on the public sector, we need to ensure that the private sector has access to the personnel that it needs to grow. Does the Minister agree that universal credit will help to make work pay, and that it will contribute to the rebalancing of the economy of Scotland and the UK?

David Mundell: I do indeed agree with my hon. Friend, who will be pleased to note that already during the incapacity benefit reassessment trial taking place in Aberdeen, a large number of people who not only want to work, but also want the support to help them to work, have been identified and have found opportunities to work in the private sector.

Angus MacNeil: Will the proposed universal credit in Scotland be affected by the Chancellor’s proposed changes in tax and national insurance, particularly in relation to the tax proposals in the Scotland Bill?

David Mundell: The hon. Gentleman has followed the progress of the Scotland Bill in detail, but he will know that in relation to the core aspects of universal credit and benefits, the Government have given an undertaking that no one will be worse off in cash terms when universal credit is introduced.

Iain Stewart: Does my hon. Friend agree that the current complexity of the benefits system means that too many Scottish claimants do not receive the benefits to which they are entitled, and that universal credit will help to target the right support on the right people?

David Mundell: I certainly agree with my hon. Friend. The amount of benefit that goes unclaimed in Scotland is a national disgrace. The system of universal credit will simplify the benefits system, as well as making work pay and combating worklessness and poverty. That is something that hon. Members on both sides of the House should welcome; it is a marked change from the 13 years of inaction from the previous Government.

“The Plan for Growth”

Mary Macleod: What assessment he has made of the likely effect on the Scottish economy of the implementation of “The Plan for Growth”.

David Mundell: Returning the United Kingdom to sustainable economic growth is the Government’s overriding priority. We are doing everything to create the conditions that enable all businesses in Scotland to be successful and create more jobs. Our plan for growth is a plan for the whole of the UK.

Mary Macleod: What views and reactions is my hon. Friend aware of among our colleagues in the Scottish Parliament and the business community in relation to the Government’s proposals to support small and medium-sized businesses?

David Mundell: The Government’s proposals for reducing corporation tax and for making changes to national insurance have been widely welcomed by businesses across Scotland. Of course, as my hon. Friend will know, small businesses in Scotland have particularly benefited from small business relief, which was delivered by Conservative MSPs.

Ann McKechin: Inflation is at double the Government’s target, growth has been downgraded for the next two years, retail figures are down and consumer confidence is at rock bottom. Will the Minister for once stand up for Scotland and concede that while the cuts may be hurting, they are not working, and that it is time for the Government to have a plan B for growth?

David Mundell: This Government do have a plan for growth—unlike our predecessor. We have set out ambitious objectives to create the most competitive tax system in the G20, to make the UK the best place in Europe to do business, to encourage investment and exports, and to create the most flexible and educated work force in Britain.
	I am sure the hon. Lady is good at figures. She will know that her party started the Scottish elections with a 10-point lead, and that today it has an 18-point deficit. That is good work with figures.

Michael Weir: Can the Minister tell us what part of the plan for growth is behind the bright idea of his colleague the Chief Secretary to the Treasury to impose a massive increase in taxation on the oil and gas industry, jeopardising investment and up to 50,000 jobs?

David Mundell: The hon. Gentleman would have some credibility in asking that question had he not repeatedly raised in the Chamber the issue of the costs of petrol and fuel oil in his constituency. It is clear that the Chancellor and the Chief Secretary got the balance right in the Budget between the taxation of the oil industry and the taxation of the motorist. If the hon. Gentleman wants to tell his constituents that they should be paying 6p a litre more on their fuel, he is welcome to do so.

Mr Speaker: I call Rosie Cooper to ask Question 4. She is not here.

Unemployment

Brian H Donohoe: By what date he expects the level of unemployment in Scotland to begin to reduce.

Nicholas Dakin: What steps he is taking to reduce the level of unemployment in Scotland.

Jim McGovern: What steps the Government is taking to reduce the level of unemployment in Scotland; and if he will make a statement.

Michael Moore: Unemployment has fallen steadily since August 2010 and employment has increased in the same period. This is a welcome sign. Supporting companies to create and sustain jobs and helping people into work are key priorities for the Government. On 19 May I am hosting a seminar in north Ayrshire, in the constituency of the hon. Member for Central Ayrshire (Mr Donohoe), on youth unemployment, and my right hon. Friend the Secretary of State for Work and Pensions will join me at this important event.

Brian H Donohoe: I look forward to our meeting on 19 May. On a another matter concerning unemployment, does the Secretary of State think that the separation of Scotland from the rest of the UK would help or hinder employment prospects for people in Scotland?

Michael Moore: It would be an absolute disaster for Scotland to separate from the rest of the United Kingdom. It is interesting that even the Scottish National party appears to recognise that, because it is not campaigning very hard on the subject.

Nicholas Dakin: In the Secretary of State’s answer to my hon. Friend the Member for Glasgow North (Ann McKechin), our Front-Bench spokesperson, he recognised that youth unemployment continues to rise in Scotland. When does he believe that his actions will begin to bring it down to an acceptable level?

Michael Moore: In response to the question from the hon. Member for Glasgow North (Ann McKechin), I said that youth unemployment had been a problem for a good long period across the United Kingdom, including under the previous Government during periods of growth. The Prime Minister, the Work and Pensions Secretary, I and everybody else recognise the need to bring it down, which is why we are meeting to discuss the core issues behind the problem, and why, through the Get Britain Working programme and the Work programme, which we have discussed already, we are introducing measures to get young and old alike off the unemployment register and back into productive work.

Jim McGovern: When will the penny eventually drop for the coalition Government? Last week in response to the Scottish Affairs Committee report on the computer games industry, the Government said that there is no case for tax incentives for the computer games industry, which is very important to this country. That was rather callous coming a week after another computer games company in my constituency went bust. Will the Government accept the blatantly obvious fact that if we want companies to set up in this country, we have to offer incentives at least comparable to those offered by our competitors overseas?

Michael Moore: First, may I again recognise the hon. Gentleman’s consistent efforts on behalf of the computer games industry? I recognise the importance of the industry not just to Dundee and Scotland, but to the UK as a
	whole. As he knows—and as I hope the response to the Select Committee’s report reinforces—we have considered very carefully the incentives we need to offer not just to the computer games industry, but to a whole range of sectors in Scotland and across the country. It is our judgment that to get ourselves away from the danger zone we were in last May, it is important to tackle the deficit and to get ourselves on the path to growth. We have done that in successive Budgets setting out plans to reduce corporation tax, to keep interest levels low, to reduce the national insurance burden and to set out important new targets for banks and their lending to small businesses. That applies to the computer industry sector as much as to any others. Once again I will be happy to meet him to discuss the matter, if he would like.

Alan Reid: Unemployment in Kintyre will be greatly reduced if the community group’s bid to buy the former air base at Machrihanish goes ahead. I thank the Secretary of State for meeting the community group recently. I have written to him with a list of outstanding issues that are still to be resolved. I ask that Scotland Office Ministers continue to work with Defence Ministers and the community group to resolve those outstanding issues as quickly as possible, so that the buy-out can go ahead, with exciting prospects for the Kintyre economy.

Michael Moore: Again, I pay tribute to my hon. Friend’s sterling efforts on this issue. I also welcomed the opportunity to meet representatives from the Machrihanish group a few months ago. I recognise that there are still issues that the group wishes to see resolved, and that these involve ongoing discussion with the Ministry of Defence. I will ensure that my right hon. and hon. Friends in the Ministry of Defence are aware of the details of my hon. Friend’s concerns, and that he receives a response to them.

Banking Failure

Philip Hollobone: Whether his Department and the Treasury have assessed the potential effect of banking failure on the economy of an independent Scotland.

David Mundell: Banks and other financial institutions are vital to the functioning of the economy. Although no specific work has been commissioned on the banking bail-out in Scotland, a 2010 National Audit Office report states that the total amount at stake is currently £512 billion. As of December 2010, £124 billion in cash had been invested in Government financial interventions. Based on NAO data, the Scottish Parliament Information Centre, SPICe, has estimated that the Royal Bank of Scotland and the Lloyds Banking Group were provided with £470 billion. SPICe also calculated that this figure was three times the annual Scottish GDP, and that the total UK Government intervention of £751 billion was equivalent to just over half of UK GDP.

Philip Hollobone: Do those figures not show that, like Iceland and Ireland, a separate Scotland would simply not have been able to survive the international banking
	crisis on its own? Is it not the case that Scotland’s economy will always be better off inside, rather than outside, the United Kingdom?

David Mundell: I could not agree more with my hon. Friend. It is interesting that as we enter the Scottish Parliament election period, the Scottish National party appears to have forgotten its proclamation about the arc of prosperity and Scotland’s wish to join the economies of Ireland and Iceland. The First Minister, Alex Salmond, also appears to have forgotten saying in the 2007 campaign:
	“We are pledging a light-touch regulation suitable to a Scottish financial sector with its outstanding reputation for probity, as opposed to one like that in the UK, which absorbs huge amounts of management time in ‘gold-plated’ regulation.”

Pete Wishart: That response shows that what has characterised the Scottish election campaign is that positivity wins over negativity. Will the right hon. Gentleman at least acknowledge and recognise that the failure of those so-called Scottish banks was down to UK regulation?

David Mundell: I do not think that the hon. Gentleman was listening to my last response. His leader, Alex Salmond, previously described the UK regulation as “gold-plated” and, at the previous Scottish elections, offered the voters “light-touch regulation”. This is the same Alex Salmond who said that the banking crisis was down to “spivs and speculators”.

John Thurso: One of the most pernicious effects of the banking failure in Scotland at the moment is the withdrawal by nationalised banks at short notice of funding for small businesses, such as TDI Ltd in my constituency. What will the Minister do to hold the moneylenders’ feet to the fire and get Project Merlin properly adhered to?

David Mundell: The Secretary of State and I are in regular contact with the banks operating in Scotland to ensure that Merlin goes forward as envisaged. We are also willing to take up individual cases such as the one that my hon. Friend mentions, which, if he refers it to us, we will refer directly to the banks in question. [ Interruption. ]

Mr Speaker: Order. There are far too many private conversations taking place in the Chamber. It is very discourteous, and I am sure that the House wishes to hear Mr Greg Hands.

Greg Hands: Thank you, Mr Speaker. Will the Minister join me in welcoming the report by the Independent Commission on Banking, under Sir John Vickers, and will he remind the House who, in the last Parliament, awarded Sir Fred Goodwin a knighthood for services to banking?

David Mundell: My hon. Friend’s interventions at Scottish questions are always welcome. He is quite right to suggest that it was the Labour Government who not only awarded Sir Fred Goodwin his knighthood but involved him in virtually every other initiative that they pursued in Scotland. The Vickers report is to be welcomed in Scotland, as it is elsewhere in the United Kingdom.

Election Timing

Karl McCartney: What progress he has made on measures to prevent the coincidence of elections to the House of Commons and to the Scottish Parliament in May 2015.

David Mundell: Government amendments to the Fixed-term Parliaments Bill deferring the 2015 Scottish Parliament elections until 5 May 2016 were agreed by the other place on 29 March.

Karl McCartney: In addition to outlining those measures, will my right hon. Friend update the House on progress towards the establishment of the commission to examine the West Lothian question, on its membership and on when we might expect to see its conclusions and recommendations?

David Mundell: As my hon. Friend knows, the coalition’s programme for government promised to establish a commission to consider the West Lothian question. A commission will be established this year to consider it, and the Government are committed to addressing the issue. We are continuing to give careful consideration to the timing, composition, scope and remit of the commission. It will need to take into account our proposals for reform of the House of Lords to create a wholly or mainly elected second Chamber, the changes in how this House does its business, and amendments to the devolution regimes such as those in the Scotland Bill, which is now before the House.

Renewable Energy

Jo Swinson: What discussions he has had with ministerial colleagues on the potential for renewable energy generation in Scotland.

Michael Moore: I have regular discussions with ministerial colleagues on a wide range of energy-related issues. Scotland has a growing reputation as a world leader in renewable energy, and we will continue to work with industry and the Scottish Government to develop these opportunities.

Jo Swinson: I thank the Secretary of State for that reply. Last month, six Scottish wind farms were paid a total of £900,000 to stop producing energy because the grid could not absorb it. What will the Government do to strengthen grid capacity and improve energy storage so that that kind of waste does not happen, and so that Scotland can properly harness its vast resources of marine, hydro and wind energy?

Michael Moore: First, may I highlight the fact that, under the complex energy management arrangements for the grid, arrangements have to be made from time to time to ensure that we can stop or increase energy production? Through those arrangements, payments are made for stopping and increasing production; that is understood. The Government have set out an ambitious programme for energy reform through our energy market reform proposals. The consultation on that programme was recently concluded, and my right hon. Friend the
	Secretary of State for Energy and Climate Change intends to publish a White Paper on the subject in the near future. Through that, and through other measures such as the transmission grid charges review, we will seek to ensure that we have the capacity and capability to exploit the renewable energy potential not only of Scotland but of the whole United Kingdom. Our other initiatives relating to the green investment bank and the offer to the Scottish Government to release the fossil fuel surplus are indicative of our intention to play a full part in the renewables revolution.

Wayne David: What meaningful discussions has the Secretary of State had with the Scottish Government on this vital issue? [Interruption.]

Michael Moore: I am afraid that I did not hear the hon. Gentleman’s question. I wonder whether he could repeat it.

Mr Speaker: The hon. Gentleman may repeat the question.

Wayne David: I was asking the Secretary of State what meaningful discussions he had had with the Scottish Government on this vital issue.

Michael Moore: There have been regular and ongoing discussions with the previous Scottish Government on these issues. I have to record great disappointment that despite our offer to release the fossil fuel surplus—something that eluded the previous Government—they were not keen to take it up. I hope that the new Government elected tomorrow, with Liberal Democrats at the core of it, will take up that very positive measure.

Robert Smith: The Secretary of State may know that the Energy and Climate Change Committee has had meetings with investors in the renewables sector in which concerns have been raised that long-term capital investments are involved, and that if the price of carbon were to change in investors’ favour, future Governments might introduce a windfall tax to compensate electricity consumers. Will my right hon. Friend reinforce the point made in the debate on Treasury matters last night that the Government want to engage with the oil and gas industry to ensure that any concerns about the stability of the tax regime can be dealt with, so that we can have a constructive engagement with the aim of maximising investment in all energy futures for this country?

Mr Speaker: Order. We need to have time for the answer.

Michael Moore: My hon. Friend makes an important point. I followed his contribution and that of my right hon. Friend the Member for Gordon (Malcolm Bruce) last night with great interest. As my hon. Friend the Economic Secretary to the Treasury pointed out, their thoughtful and constructive contribution to the debate was very worth while. We are properly engaged with the oil and gas sector, as we will be with the renewables sector, to ensure that we can put in place long-term sustainable tax regimes and other arrangements that will help to boost those important parts of the British economy.

PRIME MINISTER

The Prime Minister was asked—

Engagements

Jim McGovern: If he will list his official engagements for Wednesday 4 May.

David Cameron: This morning, I had meetings with ministerial colleagues and others, and in addition to my duties in this House I shall have further such meetings later today.

Jim McGovern: The abolition of council tax, the scrapping of student debt, the £2,000 endowment for first-time home buyers and, of course, the referendum on separatism were all promises made by the Scottish National party prior to the last Scottish elections, all of which were never kept. Will the Prime Minister inform me, the House and the country whether certain political commentators are correct when they say that he would prefer to see the separatists returned in Edinburgh for one reason only—to avoid a Labour victory?

David Cameron: I am happy to confirm that what I would like to see in Scotland is the greatest possible showing for Annabel Goldie, who has led the Conservatives with such distinction. I do not think I want to intrude on the private grief between Labour and the SNP, but one thing I will say: whatever the outcome of that election, I, for one, will always stand four-square behind the United Kingdom.

Phillip Lee: Is the Prime Minister aware of the significant fires raging in Swinley forest in my Bracknell constituency? I am sure he would like to join me in congratulating the fire and police services on the sterling work that is being done, and hope he will guarantee that the Government will be there if any requests are made by those services.

David Cameron: I certainly join my hon. Friend in praising the fire and other services taking part in this difficult endeavour. As he knows, there are well tried and tested procedures to make sure that central Government stand behind local government when there are excessive costs. I will happily write to my hon. Friend about that issue.

Edward Miliband: Will the Prime Minister tell us how many experienced police officers are being forcibly retired as a result of his 20% cuts to police budgets?

David Cameron: The decisions about police officer numbers will depend on the decisions made by chief constables in individual parts of the country. The point is that we can see in case after case that there are far too many police officers in back-office jobs, doing paperwork and carrying out corporate development work who should be on the front line. Responsible chief constables are getting those officers out on the front line to fight crime—and crime is falling under this Government.

Edward Miliband: I do not know whether the Prime Minister does not know the answer to the question or whether he chooses not to answer it. Let me tell him the answer: 2,100 experienced police officers with more than 30 years’ experience are being forcibly retired. Let us take the case of former beat officer, Martin Heard, who was forced to retire from Wolverhampton police. He is now being asked to come back to the force as a volunteer special constable—unpaid—to fill the gaps left by the cuts. What does the Prime Minister have to say to Martin Heard?

David Cameron: What is absolutely clear is that what we are getting from the Labour party is complete and utter hypocrisy. We know at the time of the last election that Labour was specifically asked, and I quote the interview:
	“Can you guarantee if you form the next government that police numbers won’t fall?”
	The Home Affairs spokesman at the time, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), said “No”, he could not guarantee that. The question is not whether the budget should be reduced—of course it has to be—but who is going to cut the paperwork, who is going to get rid of the bureaucracy, who is going to trust the local managers to make sure we get police on the front line. Those are steps we are taking; those are steps his Government never took.

Edward Miliband: He is the guy who came along and said that cuts not of 12% but of 20% were necessary for efficiency savings in the police budget. It is his choice; why does he not defend it? Perhaps one reason people are so angry is that a year ago the Prime Minister said on the eve of the election:
	“Any cabinet minister who comes to me…and says ‘Here are my plans’ and they involve frontline reductions, they’ll be sent”
	packing. What does he say to the Home Secretary about cases such as that of Martin Heard—or has he just broken another promise?

David Cameron: What the Home Secretary is doing is what police leaders up and down the country are doing: trying to get more police on the beat. In my own force in the Thames valley, that is exactly what is happening.
	When it comes to defending front-line services, is it not time that the right hon. Gentleman talked to Labour local authorities such as Manchester city council, which, although the average cut in local government spending power is just 4.5%, is cutting services by 25%? Are not Labour local authorities playing politics with people’s jobs?

Edward Miliband: The Prime Minister knows that he cannot defend his broken promises on policing. Let us talk about the other broken promises led by the Deputy Prime Minister. We know that the majority of universities are proposing to charge tuition fees of £9,000 a year. Can the Prime Minister tell us how many of them he expects to have their proposed fees cut by the Office for Fair Access?

David Cameron: That decision will depend on the Office for Fair Access.
	The right hon. Gentleman talks about broken promises. The fact is that it was the last Government who introduced tuition fees and top-up fees—but we have a new doctrine on the leader of the Labour party’s attitude to the last Government, which he announced in an interview with The Sun. He said:
	“I am not going to defend what happened in the past just because I happen to have been in the last Government.”
	Presumably we should not listen to him now just because he happens to be the Leader of the Opposition.

Edward Miliband: Once again, the Prime Minister has not answered the question. We know from the Office for Fair Access that it is not going to cut the fees of the universities. The assistant director said at the weekend:
	“We are not a free pricing regulator: that is not our role...we wouldn’t say to an institution we would only allow a fee of ‘X’ or ‘Y’.”
	Will not the Prime Minister admit that on top of a broken promise not to raise tuition fees and a broken promise that £9,000 would be the exception, he is now breaking another promise on the capping of excessive fees?

David Cameron: The fact is that we will have to wait until July, when the access regulator—[Interruption.] Let me make this point to the right hon. Gentleman. Degrees have not suddenly started to cost £7,000, £8,000 or £9,000. Degrees have always cost that much. The question is, who will pay for them? We say that successful graduates earning more than £21,000 a year should pay for them rather than taxpayers, many of whom do not go to university.
	I have to say this to the right hon. Gentleman. He made a promise: a promise that he would have a fully costed alternative to our fees programme by the end of the last year. Where is it? Another broken promise!

Edward Miliband: That is what we have come to expect from this Prime Minister. He is hazy on the facts, and unable to give a straight answer to a straight question. I know how the Energy Secretary must have felt in Cabinet yesterday. Remember what was said a year ago about two parties working
	“Together in the national interest”?
	Now what do we have? We have two parties threatening to sue each other in their own interests. That is what has changed in the last year.
	What the public are saying, in relation to police cuts, tuition fees and the NHS, is “This is not what we voted for.” Given that the Government have broken so many of the promises that they made a year ago, how can the public believe anything that they say at the elections tomorrow?

David Cameron: Even the jokes have been bad this week. The fact is that what this coalition Government have done over the past year is freeze council tax, cap immigration, lift a million people out of income tax, introduce a pupil premium, link the pension back to earnings, cut corporation tax, and set up more academies in 10 months than the last Government set up in 10 years. At the council elections tomorrow, people should remember the mess that Labour left us in, and resolve not to let Labour do to their councils what it did to our country. [ Interruption. ]

Mr Speaker: Order. The Minister for Children is under no obligation to behave like a child. It is not required.

Caroline Dinenage: Does the Prime Minister agree with the comment of Lord Glasman, special adviser to the Leader of the Opposition, that the last Government lied to the British people about the extent of immigration?

David Cameron: My hon. Friend raises an important point, which is that the last Government did not tell it straight to people about what was happening on immigration and that it has fallen to this Government to take the steps to get the numbers under control. Indeed, Lord Glasman said something that I have said many times, which is that under the last Government there was
	“very hard rhetoric combined with a very loose policy”
	and that was the worst approach of all.

Jack Straw: Does the Prime Minister share my profound anxiety about the recommendation of the advocate-general to the European Court of Justice for a European-wide ban on the patenting of stem cell research based on human embryos? Does he agree that were such a ban to be confirmed by the ECJ, it would have profoundly damaging effects on our science base and our pharmaceutical industries? Is he able to say what contingency plans the Government are putting in place to minimise the effect of any such ban?

David Cameron: The right hon. Gentleman makes an important point, and I thank him for giving me some notice of this issue. The point I would make is that this House and the House of Lords have had extensive debates to arrive at the policy that we have. I believe that it is right to try to maintain the UK as a world leader in stem cell research. Under European law, uses of human embryos for industrial or commercial purposes are exempted from patent protection. As I understand it, the legal opinion of the advocate-general at the ECJ on the scope of this exemption is advisory and does not bind the Court. As such, the opinion currently has no impact on British researchers, but we should keep this position under review.

Jeremy Lefroy: Several manufacturing businesses in Staffordshire, including Alstom in my constituency, have recently committed to significant investments and are increasing their work force. What measures does my right hon. Friend believe are necessary to ensure that the welcome growth in manufacturing in the UK continues for the long term?

David Cameron: My hon. Friend makes an important point, which is that we do want growth in manufacturing, which is very strong at the moment and has been over the past year, to be maintained. I well remember visiting the Alstom plant, although I was slightly less successful in winning Stafford than he was at the last election. Such plants will benefit from our policies of cutting taxes, boosting apprenticeships, investing in capital projects and doing everything we can as a Government and as a country to support our export industries and sell Britain around the world.

Bob Ainsworth: On 25 June last year, speaking on the Ark Royal, the Prime Minister told our armed forces that he would enshrine the military covenant in law. Why is he watering down that commitment to a useless referencing?

David Cameron: I do not believe for a minute that that is what is being done. What is going to happen is that we are going to clearly reference the covenant in law and then the covenant will be published and debated in this House every year. It is vital that we are able to update and improve it every year, because our military personnel face so many changing circumstances. We are looking across government at all the things we can do, for example, on health care, on education, and on things such as council tax for soldiers serving overseas—these are many of the things that the last Government failed to do—to look after our armed service personnel.

Jane Ellison: Later this month, Edward Lister, the Conservative leader of Wandsworth council for nearly 20 years, moves on to be the chief of staff to the Mayor of London. Will the Prime Minister join me in paying tribute to him for his leadership in consistently delivering the UK’s lowest average council tax along with top-rated front-line services? Will the Prime Minister urge more councils to follow suit?

David Cameron: I thank my hon. Friend for her question. It gives me the opportunity not only to praise Edward Lister, who has done a fantastic job over many years, but to pay tribute to Sir Simon Milton, who occupied that position and is admired on all sides of the House for the work he did at Westminster and then at the Mayor’s office. What Wandsworth has shown over many years is that it is possible to combine low taxes with good services if all the time you are trying to improve efficiencies. That is what councils up and down our country should be focused on, particularly in a year when we have to make spending reductions.

Pamela Nash: One of Scottish Labour’s key manifesto commitments is the First Foot initiative, which will help thousands of first-time buyers to get a foot on the property ladder. What is this Prime Minister doing to help this generation of home buyers, who are crippled by unemployment, student debt and rising living costs, and therefore cannot save a deposit for a House?

David Cameron: The proposal in Scotland sounds quite like our proposal in the Budget for Firstbuy, which will help tens of thousands of young people to get on the property ladder by helping them with the deposit that many families find it extremely difficult to raise. There is a real worry in our country that the age of the first-time buyer is getting older and older, and that many families are finding that unless they have family help behind them they simply cannot get on the housing ladder. We must ensure that that is not the case and Firstbuy is a very good proposal that we are introducing in England. I will be interested to see what happens in Scotland.

Stephen Mosley: Conservative-run Cheshire West and Chester council is saving millions by cutting waste, boosting efficiency
	and selling surplus property to help protect front-line services. Meanwhile, in next-door Labour-run Halton, the council is cutting back on bin collections and road maintenance instead. What does my right hon. Friend think can be done to help councils reach fair and sensible decisions?

David Cameron: I would encourage all councils to look at costs that can be cut that are not on the front line. Many Conservative councils are sharing chief executives with their neighbouring councils and cutting councillors’ allowances and chief executive pay. There are too many examples, particularly in Labour councils, of chief executives being paid far too much and of not nearly enough attention being paid to cut the back-office costs so we can keep the services going.

Jack Dromey: The Government are cutting the police and Birmingham city council is cutting care to the elderly and disabled. There is dismay in my constituency that high-need, high-unemployment Birmingham is being hit far harder than the leafy shires such as Surrey. Will the Prime Minister therefore answer the question put to me by my constituents—why have the Tories got it in for Birmingham?

David Cameron: A coalition between Conservatives and Liberal Democrats has been doing a great job for Birmingham, ensuring that council tax is kept down, investing in housing and ensuring that there are good public services. Many of the things we have done, such as the regional growth fund, are targeted at areas such as Birmingham. The hon. Gentleman should go back to his constituents, and after he has apologised to them for the fact he was the winner of an all-woman shortlist he should tell them that coalition government between Conservatives and Liberal Democrats is working at Westminster and working well in Birmingham.

James Clappison: In 2005, the previous Labour Government agreed to hand back part of the UK’s EU rebate at a cost to UK taxpayers of £9.4 billion over the lifetime of this Parliament. Has my right hon. Friend seen any evidence of what precisely was obtained in return for that remarkable generosity?

David Cameron: My hon. Friend makes an important point. Part of the rebate was given up and it was not given up for any proper promise in return. We were told that there would be a promise of real reform of the common agricultural policy and that did not appear. That shows me that we have to be incredibly tough in the budget negotiations this year and next so that when we go into the financial framework for the next seven or eight years we ensure that we keep the costs of this organisation under control.

Kelvin Hopkins: The Government’s savage cuts are set to destroy some half a million jobs in the public sector and, according to PricewaterhouseCoopers, a similar number in the private sector. With thousands more on the dole, paying no taxes and dependent on benefits, the deficit will increase rather than reduce. As sure as night follows day, we will see a collapse in the housing market, a collapse in
	support for the Tories and a return to Labour government. Will the Prime Minister enjoy saying goodbye to most of his colleagues and sitting on this side of the House?

David Cameron: I thought the hon. Gentleman was from Luton, but he sounds like he is from fairy dairy land. Let me remind him that compared with this time last year 400,000 more people are in jobs in the private sector. That is what has happened through our getting the deficit under control, getting the economy growing and ensuring that we deal with the mess we were left by the Opposition.

Andrew Selous: Is my right hon. Friend aware that Conservative-run Central Bedfordshire council has been rated as the highest performing council of all its statistical neighbours by PricewaterhouseCoopers for value for money, effectiveness and service delivery? Is this not the type of example that we should encourage more councils to follow?

David Cameron: My hon. Friend is absolutely right. Well-run councils that ensure they are cutting back-office costs can provide good services. When one looks at the figures, one can see that those Conservative councils are not just costing less for a band D property but doing better on measures such as recycling and other service delivery. It is simply not true to say that by cutting costs councils harm services. They have to be effective at keeping their costs down to provide good services.

Kerry McCarthy: Next Wednesday, the Hardest Hit campaign will be lobbying MPs in Parliament through constituents of ours with severe disabilities and chronic illnesses who are bearing the brunt of this Government’s attack on welfare benefits and public services. Will the Prime Minister have the courage to meet some of those campaigners face to face next week so that he can hear from them at first hand about the devastating impact that this callous and uncaring Government are having on their lives?

David Cameron: I make two points to the hon. Lady. First, the most important line of defence to help people with severe disabilities and severe need is the national health service and it is this Government who are putting more money into the national health service—£11.5 billion extra. That money would not have been available if we had a Labour Government; we know that because we can see Labour cutting £1 billion off the NHS in Wales. In terms of reforming benefits, I thought we had the support of the Labour party to reform benefits to make sure they are helping those who need the help most.

Jason McCartney: Last week, I joined 170 other Huddersfield Town fans in cycling from Huddersfield to Brighton to raise £200,000 for the Yorkshire air ambulance. Will the Prime Minister join me in praising Huddersfield Town for raising that money and will he also look into why the air ambulance has to pay VAT on its fuel although the Royal National Lifeboat Institution—another emergency charity service—does not?

David Cameron: First, I would like to congratulate my hon. Friend on his bicycling feat, as well as all those who took part from Huddersfield Town. I also pay tribute to our air ambulance crews across the country, who do an amazing and brilliant job. I have looked specifically at this issue. As he probably knows, the EU VAT directive does make an exemption for lifeboats, but there is no equivalent provision for supplies used by other charities and we are not able to change that. However, we are able to do more for charities, as we did in the Budget, including with the inheritance tax exemption, which I think is going to make a huge difference for charities up and down our country. I hope that he will do everything he can to encourage them to make use of that.

Tony Lloyd: Child poverty is a cancer that means that children in our society go to bed hungry in homes that their parents cannot afford to heat. The Prime Minister will be aware of the recent Organisation for Economic Co-operation and Development report that says that the great progress that was made has now stalled and that the numbers are once again due to go up. If the Prime Minister agrees with me, as I think he will, that this is a moral imperative for any Government, will he tell the House what he will do now to change policy and make sure that our innocent children will not be the victims of Government cuts?

David Cameron: I do believe it is a moral imperative and I have looked at the OECD report carefully, which does show that things stalled under the previous Government in recent years. What I would say is that despite having had to take difficult decisions in the Budget we did make sure that there has been no increase in child poverty as a result of the Budget. I think it is time, frankly, for a more mature, cross-party debate on how we can make sure that we get people out of poverty rather than just looking at the transfer of money between rich and poor. That is why we are looking at things such as the pupil premium, free nursery education for deprived two-year-olds and making sure that Sure Start is working properly, because it is all those things that will help children out of poverty in a more sustainable way.

Greg Hands: This week, the three top-rated councils of Hammersmith and Fulham, Kensington and Chelsea and Westminster are discussing extending their combined services to save £35 million a year while still improving front-line services. What can the Prime Minister do to encourage this approach rather than that of Labour-run Hounslow, which is closing day care centres, squeezing parks maintenance and cutting mental health services in a slash-and-burn approach?

David Cameron: I think this is a very important point and I hope that councils up and down the country will look at it. Three large councils are coming together and saving £35 million because they are sharing back-office services, executive teams and so on. Frankly, if they can do it, as large councils that have big responsibilities, many other councils should be doing it in London and elsewhere. Until we see that happening, I do not think it is realistic to say that it is necessary for councils to cut front-line services.

Mike Gapes: More than 100 years ago, Parliament legislated to make sure that local authorities provided allotments. Healthy local food is a very good part of good British values. Why therefore are the Prime Minister’s Government scrapping the obligation on local authorities to provide allotments?

David Cameron: I was as concerned as the hon. Gentleman when I read that report. I immediately checked, and found that that is not the case. It is extremely important that allotments are made available. Many Members will find that when they ask about that in their constituencies there are massive queues for allotments, as many people want to grow their own vegetables and food and understand more about where food comes from. It is a great movement, and it has my full support.

Mark Menzies: The chief executive of Conservative-run Fylde borough council has taken a 5% pay cut, whereas Labour-run Blackburn has cut services to young and vulnerable people while increasing its reserve to £12.7 million. What can the Prime Minister do to encourage councils to behave more responsibly like Conservative-run Fylde?

David Cameron: One of the most important things that we can do is make all that information available. This Government have massively increased transparency. Every council in the country has to declare its spending on any item over £500, and people have found that useful in seeing how much council executives are paid, how much councillors are paid, and making sure that they bear down on those costs. I commend what is happening in Fylde, and it is a matter of great regret that there is still one council—Labour-controlled Nottingham—that will not make that information available.

Michael Meacher: Given that private borrowing was falling at the last election why, according to the Office for Budget Responsibility, do the Government plan to ramp it up by half a trillion pounds to a total of more than £2 trillion by 2015?

David Cameron: What the Government are doing is getting control of Government borrowing—that was the real crisis at the last election. It is an important point to make, particularly on a day when we read about Portugal going for an enormous bail-out. It is worth reminding ourselves that today we have a bigger budget deficit than Portugal. The reason we are not in Portugal’s position is that we took action in two brave Budgets and a spending round to clear up the mess left by the right hon. Gentleman’s hon. Friends.

Therese Coffey: I am sure, Mr Speaker, that you and the Prime Minister have enjoyed the good weather, especially last Friday, the day of the royal wedding, and perhaps visited tourist hot spots such as Southwold and Aldeburgh. Just down the road from those hot spots, farmers might be about to suffer a drought, and are genuinely concerned about the lack of rain, as their ability to abstract water may be limited. Will the Prime Minister meet me to discuss those genuine concerns about restricting water for our farmers?

David Cameron: I am happy to meet my hon. Friend. Everyone has been enjoying the recent weather, and it was fantastic that the weather was so good for the royal wedding. However, farmers face real issues because, at a time of year when they expect a lot of rain, they have had virtually none.

Mary Glindon: With the strong likelihood that the Lib Dems will come off worst in tomorrow’s local elections, and hopefully the rejection of the alternative vote in the referendum, what political words of comfort will the Prime Minister have for his by then beleaguered deputy on Friday?

David Cameron: Of course, we do not agree about the future of our electoral system. We are having a referendum and a debate about it, but the reason for having a coalition Government coming together and sorting out this country’s problems in the national interest is as good an argument today as it was a year ago, when we came into government to clear up the mess made by the Opposition.

Rory Stewart: In the light of the success of the royal wedding for public diplomacy, does the Prime Minister believe that it reinforces the importance of a different narrative for the diamond jubilee from the Olympics, in terms of what it can do for Britain’s international reputation?

David Cameron: We have a fantastic opportunity next year to show all faces of Britain, both modern and traditional. We are going to celebrate the jubilee, and I think that people will want to celebrate the incredible public service that Her Majesty the Queen has given over many years as an absolutely amazing model public servant. People will also want to celebrate the Olympics as a celebration of sport and all that is best about Britain. The royal wedding, as the Major of London said, was in many ways a dry run for how we handle some of those events, and everyone in the country has a lot to look forward to next year.

Alison McGovern: Many of my constituents in Wirral worry about the quality of care that older people, especially those with dementia, receive in hospital. How does the Prime Minister think that his now paused, top-down reorganisation of the NHS will help to make sure that older people are looked after with real dignity?

David Cameron: One of the aims of the changes that we are making to the NHS must be better to link the national health service, social service provision, local authorities and how we look after the elderly. All of us have seen too many cases in hospital where people who should be in residential or nursing care or being looked after at home are stuck in a large district general hospital or in a community hospital, when they should be getting alternative pathways of care. That is what the whole change should be about. What I am finding as I go round the country listening to doctors, nurses and clinicians is that we must make sure we take the opportunity to get this absolutely right. That is what the reforms should be all about.

Bob Russell: In last year’s general election in Essex 49% of the votes cast went to the Conservatives, but 95% of the seats went to Conservative MPs. It was an outcome that would embarrass Robert Mugabe. Apart from the fact that Essex is now a Labour-free zone, does the Prime Minister think that that result was fair?

David Cameron: My hon. Friend tempts me into debate. In Colchester everyone had one vote, it was counted once and he won. I congratulate him. In other parts of Essex everyone had one vote, they were all counted once and many of my hon. Friends won. But for all that he brings to the House, what the Liberal Democrats lack in number, he makes up in stature as a Member of Parliament for Essex.

Speaker’s Statement

Mr Speaker: I have to inform the House that I have received the following letter from the Clerk of the House:
	Dear Mr Speaker,
	As you know I have decided to retire at the end of September when I will have completed forty four years of service to the House, over a decade of which has been at the Table.
	It has been an immense privilege to serve what I unashamedly regard as a Parliament second to none. Over this long period—which began during the Speakership of Horace Maybray King—there have been great challenges and many changes. There have been crises that have rocked the institution. Throughout these times it has remained my firm belief that only by having confidence in itself, in its ability to adapt to the new while keeping to the tried and tested, can the House retain its pre-eminent position as the sovereign body at the centre of our national, democratic life. Unwarranted and unfounded criticism from whatever quarter should not deflect Members from their duties which will necessarily ruffle and disturb the peace of consensus.
	I would like to put on record my great debt to members of the staff of the House, at all levels, who have given me unstinting support. They make up a loyal and very effective workforce. I would like to thank my colleagues on the Management Board and in my own office for their invaluable help without which many of the changes that have happened in recent times could not have been made effective.
	Friendships with Members and colleagues in the scattered Commonwealth parliaments, which together form an important parliamentary community, have given me much pleasure. Here at home fellow Clerks have kept me on my procedural toes and I have enjoyed working, across party divides, with Members of the House, past and present and with Members and colleagues in the other place.
	Finally Mr Speaker may I thank you and your Deputies, with whom I have worked closely, for your trust and for the camaraderie we have enjoyed together which has greatly lightened what can be serious and sometimes difficult moments.
	Yours sincerely,
	Malcolm Jack
	Members will wish to know that I have put in place a competition for the appointment of the Clerk’s successor.
	There will be an opportunity to pay the traditional tribute to the Clerk at a later date. [ Applause .] That spontaneous reaction demonstrates the respect and affection in which the Clerk of the House is held.

Points of Order

Paul Flynn: On a point of order, Mr Speaker. As Many Members were inexplicably absent at 4.30 this morning, they will have missed an important debate that drew attention to a great weakness in our role: we are able to heap praise on certain individuals, but we are forbidden the privilege of everyone outside the House to be critical of those individuals. Can you suggest a way in which we can ensure that that rule, which demeans the office of MP, is changed and we can enjoy the freedom of everyone outside the House to be critical of anyone when necessary?

Mr Speaker: Criticism of the kind and in the direction that the hon. Gentleman has in mind can always be made on a substantive motion. That is the specific solution to the problem that he has just identified. More widely, if he is concerned, as I know he is, about the current Standing Orders and seeks their reform, it is open to him to seek support for such a proposition across the House. I must leave it there for today.

Derek Twigg: On a point of order, Mr Speaker. I ask for your advice, please. The hon. Member for City of Chester (Stephen Mosley) has inadvertently misled the House today by suggesting that the bin collection service in Halton has been cut. As someone who is not only the Member of Parliament for Halton but who actually lives there, I must say that this was the first I knew about it. The service has not been cut. There is a pilot scheme, which has come about as a result of consultation in two wards, to look at alternative bin collections as a result of the demand for more recycling and more recycling receptacles. There has been no decision to cut the weekly bin collection service, so the hon. Gentleman is wrong.

Mr Speaker: I am grateful to the hon. Member for Halton (Derek Twigg). I know that he may find this difficult to accept, but this is a matter of debate, and he has put his point firmly on the record—probably not for the first time, and certainly not for the last.
	If there are no further points of order, we come now to the ten-minute rule Bill, for which the hon. Member for Mid Bedfordshire (Nadine Dorries) has been patiently waiting.

Sex Education (Required Content)

Motion for leave to introduce a Bill (Standing Order No. 23)

Nadine Dorries: I beg to move,
	That leave be given to bring in a Bill to require schools to provide certain additional sex education to girls aged between 13 and 16; to provide that such education must include information and advice on the benefits of abstinence from sexual activity; and for connected purposes.
	I am sure that many Members will be aware of the broadcaster Dame Joan Bakewell. I always had the impression that she and I were on separate sides of the political divide, but I was intrigued a year ago to read something that she had written in the Radio Times and in the newspapers, in which she said that Mary Whitehouse, who campaigned against declining moral standards on television, was right to fear that sexual liberation in the 1960s would damage society.
	Dame Joan was a long-time and fierce opponent of Mary Whitehouse, and that is why her piece was intriguing. She has now changed her mind in terms of her opposition, saying that the freedom granted by the introduction of the pill has been abused, resulting in the sexualisation of young girls and the prevalence of pornography. She said:
	“The liberal mood back in the ’60s was that sex was pleasurable and wholesome and shouldn’t be seen as dirty and wicked. The Pill allowed women to make choices for themselves. Of course, that meant the risk of making the wrong choice. But we all hoped girls would grow to handle the new freedoms wisely. Then everything came to be about money—so now sex is about money, too. Why else sexualise the clothes of little girls, run TV channels full of naked wives, have sex magazines edging out the serious stuff?”
	In fact, in some newsagents now there are more sex magazines available than any other kind of magazine.

Chris Bryant: Well, stop going to those shops then.

Nadine Dorries: That is a typically glib comment from the hon. Gentleman, who just does not understand and will oppose this measure. Indeed, it will be interesting to see a man stand and oppose a Bill that is about empowering young girls.
	Dame Joan said that our society is saturated in sex: a typical prime-time hour on TV contains 2.6 references to intercourse, 1.2 references to prostitution and rape, and 4.7 sexual innuendoes.
	Let us move on to look at some of the examples that are now available. Primark, a store that is frequented by many young girls, including my own daughters, was recently chastised for selling padded bikinis for seven-year-olds. Without going into too much detail, I am sure that everybody in the House understands why women would buy padded bikinis, but to make them available to and target them at seven-year-old girls seems to epitomise how far the sexualisation of young girls has gone within our society.
	On 5 March 2010, explicit videos were shown in schools which depicted to seven-year-olds a cartoon graphic of a couple having sexual intercourse. This resulted in some children being removed from schools
	that showed those videos. It will not be a surprise to any mother, or parent, in the House that seven-year-old children do not want to see a cartoon of a couple having sexual intercourse. I have never yet met a mother who said, “I want my seven-year-old to see cartoons of couples having sexual intercourse”, so why on earth would schools think it appropriate to show such videos to seven-year-old children in the classroom? Some children were reported to be frightened, alarmed and disturbed by the videos.
	In July 2009, a Sheffield NHS trust released into secondary schools—to children from the age of 11—a pamphlet which told them that sex every day keeps the doctor away. It also said that for too long experts have concentrated on the need for “safe sex” and loving relationships. Alongside this, there was a slogan saying that
	“an orgasm a day keeps the doctor away”.
	It also said:
	“Health promotion experts advocate five portions of fruit and veg a day and 30 minutes’ physical activity three times a week. What about sex or masturbation twice a week?”
	This is a pamphlet going out to 11-year-olds at secondary modern schools in Sheffield.
	We have to ask ourselves whether, in the midst of this kind of society, with the over-sexualisation of children, we have got our sex education in schools right. It is often argued that compulsory sex education and effective teaching of “safe sex” will help to tackle a high pregnancy rate among teenagers and underage children. Sadly, the evidence suggests that this is not the case. The British Medical Journal found that 93% of teenagers who became pregnant had seen a medical professional prior to the pregnancy and 71% had discussed contraception. The journal found that
	“teenagers who become pregnant have higher consultation rates than peers and most of the difference is owing to consultation on contraception”.
	According to data published by the Office for National Statistics in 2007, Britain has the highest teenage pregnancy rate in western Europe, so we must be doing something wrong. That is why I am introducing this Bill.
	I believe that the answer to ending our constant struggle with the incredibly high rate of teenage sexual activity and underage pregnancies lies in teaching our girls and boys about the option of abstinence—the ability to just say no as part of their compulsory sex education at school. I recently spoke to a 16-year-old who used these very disturbing words: “The thing is, if you reach the age of 18 and you’re still a virgin, and you meet somebody you’d like to be your boyfriend, he’s going to think you’re a freak.” It never enters the minds of young teenage girls, who are taught in sex education classes about “safe sex” and about making their decisions on whether to have sex based on how they feel that day or on their wishes—“feelings” and “wishes” are the key words—that they are empowered and have the ability to say no. That is not taught alongside information on making the decision based on their feelings and wishes and on “safe sex”, but it should be an equally viable option.
	We have to re-examine thoroughly the content of sex education that is provided in schools, and consider whether what is currently offered is in the best interests of our children and society as a whole. Children learn
	about puberty and intercourse at the age of seven, and about pregnancy and contraception from the age of 11. Teaching a child of seven to apply a condom to a banana, without telling them that they do not have an obligation to go and do it, is almost like saying, “Now go and try this for yourself.” At no stage of the curriculum does the teaching cover anything about relationships and the option to say no. Girls are taught to have safe sex, but not how to say no to a boyfriend who persists in wanting a sexual relationship. They are given no guidance on that whatsoever.
	In a letter to the Daily Mail, a 14-year-old, Josie Parkinson, described the sex education that she had received at her local secondary school:
	“As a 14 year-old girl, I have had to attend four talks in the past nine months from a woman from a family planning clinic. I have been taught three times how to put on a condom; how easily pupils can acquire condoms free at a clinic; how to recognise sexually transmitted diseases and have them treated confidentially at a clinic; and that we do not need to tell our parents, GP, the police or anyone else in authority about being provided with contraception, or even having an abortion. There was not one mention of abstaining or any discouragement of sex.”
	For a girl or boy to have sex before 16 is unlawful, but they are told in school, “It is unlawful, but it’s okay. You can have the condoms anyway.” They should be told, “It is unlawful. You can have the condoms anyway, but why don’t you consider, because it is unlawful, saying no and waiting until it is lawful?” That just is not taught to girls at school.
	One factor constantly ignored by society is that peer pressure is a key contributor to early sexualised activity among the children of our country. Society is focused on sex. Our sex education teaches children how to have sex, not how to say no to sex. We ignore at our peril the fact that many girls feel pressurised into having intercourse when they are far too young, when what they actually need is their childhood.
	In our sex education programmes, we need to promote the notion of abstinence and all the advantages that it brings, such as self-respect and not making relationship mistakes. It needs to be seen as a safe alternative. We need to let young girls know that to say no to sex when they are under pressure is a cool thing to do; it is as cool as learning how to apply a condom. It is as important as all the other issues that they are taught in sex education. It has to be taught alongside everything else so that young girls can say, “I have been told to say no.”

Chris Bryant: I note that the hon. Member for Mid Bedfordshire (Nadine Dorries) said that it would be a disgrace, or something like that, if I were to speak on this matter because I am a man. Of course, I am a gay man, so I am not exactly an expert on heterosexual sex or sex with girls. However, I say to her that this is the daftest piece of legislation that I have seen brought forward. I agree about many of the problems that she has highlighted, and I will come on to those, but this is not the way to solve any of those problems.
	For a start, the Bill is just about girls. I said that I am not an expert, but it seems axiomatic to me that if we want to tackle teenage pregnancy, we have to talk to the boys and the girls. Secondly, the Bill is just about 13 to
	16-year-olds. I did a lot of research on teenage pregnancy a few years ago, and one of the great distresses for a large number of girls was that they got to their first period without knowing what was happening to their body. I think that proper education in schools, which gives girls and boys an opportunity to seize hold of their lives and make good decisions for themselves, should start long before a girl’s first period.
	Thirdly, the hon. Lady talks about an abstinence programme. Of course, the single most important thing that we can give any child in their education, boy or girl, is the self-confidence to make good decisions for themselves and, when they have made bad decisions, to be able to stand up to the consequences. There are things that we need to do through housing allocation and the benefits system to address those issues. However, there is no evidence anywhere in the world that an abstinence programme of sex education works in delivering the outcomes that she wants.
	Fourthly, the hon. Lady refers only to sex education; she just wants sex education. She refers to the number of youngsters who are told how to put a condom on a banana. I have never understood why putting a condom on a banana or a cucumber is of any use to anyone, but she is absolutely right in saying that if sex education is just about teaching people the mechanics of having sex, it is effectively an advert. Rather than the present legal situation where the only obligatory bit is sex education—in other words, the mechanics and teaching people about sexually transmitted infections—there should be proper sex and relationship education starting at an early enough age to make a real difference.
	The level of teenage pregnancy in my constituency is probably higher than in the hon. Lady’s, because the map of high teenage pregnancy figures is the map of poverty in this country. I feel absolutely passionately about trying to cut the number of teenage pregnancies. Indeed, I have done a great deal of work on trying to do that in my constituency. The hon. Lady rightly refers to the statistics showing that we have the highest rate in Europe. It is not just higher than anywhere else; it is fives times higher than in Holland, three times higher than in France and twice what it is in Germany. Yet countries such Holland, France and Germany have much better sex and relationship education in their schools that starts at a much younger age and is much more explicit. That is part of the difference.
	There are many other elements to trying to rectify this situation, but one of the reasons why many Opposition Members think that teenage pregnancy is such an important issue is that it is not just wealth that is inherited in this country; all too often, poverty is inherited, in many cases because of teenage pregnancy. Lots of teenage mums are absolutely wonderful—they triumph against the odds—but many of the babies that are born to teenage mums are much smaller and have more health problems, and if they are girls, they are three times more likely to become teenage mums. We thus perpetuate the cycle of poverty, particularly in certain parts of the country. That is why I believe that we should have far better sex and relationship education in schools.
	Incidentally, I am delighted that a Labour Government, through resolute work between the Department for Education and the Department of Health, managed to cut the figures significantly in this country. History shows that the time when the figures grew most dramatically
	was under Mrs Thatcher. We have now seen the figures for 2009, and they show that we have reached a record low compared with 1980. I am not at all complacent about that, because there is a great deal more to do. My own ten-minute rule Bill is in a charabanc situation and as unlikely to become legislation as the hon. Lady’s.
	We need to address other associated problems. The number of children in care in this country is a shock and a disgrace, and it has risen dramatically to 65,000 in England. It has gone up from 3,000 to 5,000 in six years in Wales. It is difficult to find good care arrangements for many of those youngsters. Hospital admissions for self-harm, particularly among young girls, have risen by some 30% in Wales over the past few years.
	Yes, we have achieved great things for young people in recent years. Drug use has decreased over the past decade—some 7% of youngsters between the ages of 16 and 24 have used a class A drug. Contrary to what hon. Members will read in the national newspapers, drinking among 15-year-olds has decreased quite dramatically. Ten years ago, 58% of boys said that they drank alcohol; the figure is now 36%. The figure for girls is down from 54% to 30%. [ Interruption. ] Government Members may ask what that has got to do with teenage pregnancy, but every time that I talk to young people about teenage pregnancy, they tell me what happens: everyone has a great idea and a strong set of moral principles at 6 o’clock in the evening, when they have not had a drink, but by the time that they are blotto at 11.30 at night, all those choices disappear out the window, and they start to take much more risky decisions. That is why tackling the consumption of alcohol by youngsters is just as important as every element of sex and relationship education.
	Some of those figures relate specifically to girls, but many more young men commit suicide than young women. Although the number of suicides among young people has fallen by a third over the past few years, the single most important thing that we can give to any young person is a sense of their own worth. Of course, some of them are in families or schools where they do not feel valued, but to introduce legislation that applies only to girls and refers only to sex education, rather than to the broad experience that young people have to have fulfilled, is a complete mistake.
	Better legislation would ensure that girls and boys had proper, thorough sex and relationship education in all schools, with no school allowed to opt out. Yes, if parents want to opt out, that is fine. Yes, they should be able to draw up the curriculum, but schools should not be able to opt out because, as Ofsted has pointed out, the provision of sex and relationship education is very patchy in England, and we are letting down far too many of our youngsters.
	Many teachers are frightened of providing such education because it is not a formal part of the curriculum. Youngsters pick up that fear, and that informs some of the bad choices that they end up making. Yes, we should teach self-confidence and self-worth. Some work done by the Joseph Rowntree Foundation showing that many young girls choose to get pregnant almost as a vocation or are so careless about having sex that they end up pregnant is very distressing. They often have no self-worth, they are not valued at home, and they find the educational arrangements at school difficult; but the moment they get pregnant, suddenly everyone comes
	round and provides them with support. Would it not be better if we gave them the support that they needed before they made that wrong decision for themselves?
	In addition, we need to enhance out-of-school activities. I worry that many local authorities will cut youth services because of the situation with local authority grants. Youth services are often where young girls and boys have a positive role model for the first time in life that is not just an authority role model in school. That is why those services play such an important part in changing all this.
	Finally, the only thing that I would add is that, sadly, many youngsters get only 10 minutes of sex education in their whole lives. They do not get proper sex and relationship education; they spend less time on it than we have had to debate the issue today.

Question put (Standing Order No. 23).
	The House divided:
	Ayes 67, Noes 61.

Question accordingly agreed to.
	Ordered,
	That Nadine Dorries, Thomas Docherty, Mr Julian Brazier, Dr Thérèse Coffey, Mr Edward Leigh, Fiona Bruce and Mark Pritchard present the Bill.
	Nadine Dorries accordingly presented the Bill.
	Bill read the First time; to be read a Second time on Friday 20 January 2012, and to be printed (Bill 185).

Finance (No. 3) Bill

(Clauses 4, 7, 10, 19, 35 and 72)
	[Relevant document: The Eleventh Report from the Treasury Committee, Finance (No.3) Bill 2010-11, HC497.]
	Further considered in Committee (Progress reported, 3 May)

[Mr Lindsay Hoyle in the Chair]

Clause 4
	 — 
	Main rate for financial year 2011

Question (3 May) again proposed, That the clause stand part of the Bill.

David Gauke: It is a great pleasure to begin today’s proceedings by winding up today’s debate, or at least the first of our debates this afternoon, which was one of our debates this morning. It is on clause 4, which sets out the main corporation tax rate for the financial year beginning on 1 April 2011, reducing it to 26%. The measure introduces a further reduction of 1% for this financial year, in addition to the 1% cut that was legislated for last year. Further 1% reductions to the main rate will be made in each of the next three years, taking the rate to just 23% in 2014-15.
	Those changes will lower the tax bill of around 45,000 companies that pay tax at the main rate, and of 40,000 companies that are taxed at the main rate but that benefit from the marginal relief. To explain that further, the changes will affect incorporated businesses that have profits of between £300,000 and £1.5 million that pay corporation tax at the main rate reduced by marginal relief, and those that have profits of more than £1.5 million that pay corporation tax at the main rate in full. As I said, clause 4 sets the rate at 26%—the adjustment to the marginal relief fraction is made in clause 6.
	Clearly, a thriving private sector must be at the heart of our plan for growth. As we reduce spending, as we must if the UK is to live within its means, only the private sector can spearhead the recovery. We must therefore show that the UK has an attractive tax system and is open for business. This Government are taking action to show the international business community just that. The UK is the right place to do business, and our tax system is one reason why. Our priority is securing strong, sustainable and balanced growth, and clause 4 will help to see to that by supporting investment and by incentivising activity across the economy.

David Hanson: I realise that we debated this much earlier this morning, but much of our discussion was on the outcomes of this process. The Opposition do not object to the purpose of the corporation tax cut, but I would welcome clarity from the Minister. How many jobs does he believe will be saved because companies do not move abroad because of the cut, how many new jobs will the cut attract by bringing new investment into the country, and what growth does he
	expect to result from the investment that we are taking away? As was said last night, we are forgoing a considerable sum of corporation tax income, and I should like clarity on what the Minister believes will be the solid outcomes of that.

David Gauke: First, I warmly welcome what the right hon. Gentleman says about supporting the reduction in the corporation tax rate. In seeking to persuade investors to invest in the UK, it is important that we have a strong, solid, cross-party consensus that the UK should have competitive, low rates of corporation tax. To the extent that the official Opposition take a clear, supportive view of what the Government are trying to do, that is helpful to our ambitions, and I welcome it. I am keen to ensure that they maintain that position.
	The right hon. Gentleman asked about the specific impacts and outcomes of the measure. If he will be patient and let me first set out why I think the steps that the Government have taken on corporation tax are helpful, I will say as much as I can about the likely outcomes later. I should also thank him for quoting at considerable length one of my speeches on this subject. I am tempted to refer him to his own speech when he quoted my speech, but that would be a little circular.

Edward Timpson: On anticipating the outcomes of reducing corporation tax, does my hon. Friend recall that one key aspect of the Federation of Small Businesses general election manifesto was a reduction in corporation tax and the benefits that that would have to small businesses around the country?

David Gauke: I am grateful to my hon. Friend, because he brings me to the subject of the small profits rate of corporation tax. That is not specifically addressed by the clause, but the previous Government intended to increase the small companies rate, as it used to be called, from 21% to 22%. In the previous Budget, this Government announced that we would not increase it to 22%, but reduce it to 20%. That policy, along with our policy on employers’ national insurance contributions, was warmly welcomed by the FSB. That demonstrates the Government’s commitment, at a difficult time for the public finances, to ensuring that we have the strong, private sector growth that the economy so badly needs.
	Let me briefly set out why reducing corporation tax rates is important. A competitive rate helps to sell the UK as a place to do business, and encourages businesses to invest and thrive here, which is vital if our economy is to grow. My right hon. Friend the Chancellor has had to take some difficult decisions since the election, and clearly, because of the size of the deficit we inherited, we cannot rely on unsustainable public sector spending to carry the economy. We need to rebalance the economy and to remember the value of enterprise. Growth in the public sector feeds the deficit, but growth in the private sector feeds the recovery that the country needs.
	Budget 2011 delivers a fiscally neutral package of measures, and the Government remain on course to deliver our fiscal consolidation plans. The costs of policy decisions announced in the Budget are broadly offset in each year by measures that raise revenue, but
	within that fiscally neutral envelope, Budget 2011 includes action to support private sector recovery and to improve the long-term sustainability of the public finances.
	The Government published our plan for growth, which is the first phase of the growth review, which involves action across the economy. The further 1% reduction in the main corporation tax rate will help us to achieve the ambition of growing the private sector, regaining even more of the competitive advantage that we have lost in recent years.
	However, that is only one part of the Government’s strategy to remove barriers to growth. In his speech much earlier today, the right hon. Member for Delyn (Mr Hanson) argued that corporation tax rates are not everything, and he is right, but the Government have set out in our plan for growth policies that aim to put the UK on the path to sustainable, long-term economic growth. It is worth quoting John Cridland, the director-general of the CBI, who said:
	“This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business…The extra 1p cut in corporation tax will help firms increase investment.”

Andrew Love: When the Office for Budget Responsibility was informed late of the additional 1% reduction in corporation tax, it commented that the impact on growth would be minimal. How does the Minister explain that in the context of the claims he is making for that reduction?

David Gauke: Let me turn to the impact of this measure. When the OBR analysed the corporation tax package that was announced in 2010, it made it clear that that would help with the cost of new capital investment in the UK. It expected that the recovery would be supported by business investment, and the reductions in corporation tax underpinned its forecast for strong business investment growth over the next five years. In June, the OBR increased its estimate for expected investment and gross domestic product in response to the corporation tax package. Its analysis was that the resulting 3% reduction in the cost of capital would
	“promote a higher level of business investment…than would otherwise have been the case.”
	In total, that resulted in a forecast of an additional £13 billion of business investment by 2016.
	The right hon. Member for Delyn asked about particular businesses and sectors. However, the best way to run an economy is not the Government dictating from the centre. Running an economy is about providing a competitive environment in which businesses from all sectors can grow. Making sectoral forecasts tends to be difficult, and there are severe accuracy questions.

David Hanson: I am trying to be helpful and to seek clarity on what the Exchequer Secretary would regard as success, given the investment he is making through not collecting the previous level of corporation tax. In our discussions on the National Insurance Contributions Act 2011 before Christmas, an amendment was tabled to ensure an opt-out in certain parts of the United Kingdom. An assessment was made of the number of jobs that would be created by the measure. I am asking whether he has made a similar assessment with his officials of the potential of this measure to have an impact on growth and jobs in our economy.

David Gauke: As I said, the OBR considered the package in the June 2010 Budget and incorporated the changes along with other announcements. From that it anticipated an increase in business investment, and clearly there was a link between the corporation tax package and that increase in investment. We believe that by reducing the cost of capital, we will increase business investment above the levels that would otherwise have been the case.
	I was struck by the right hon. Gentleman’s speech this morning in which he took considerable time to outline more than once the unemployment numbers in various regions of the UK. I was struck by the contrast between the argument he appeared to be making this morning, which was that the corporation tax cut needs to be targeted at regions with higher unemployment, and the argument he made during our considerable debate on the National Insurance Contributions Act, which was that it was wrong for us to target the national insurance contributions holiday at regions where the public sector was strong and unemployment high. I am not sure there was much consistency there, but there was great ingenuity in his speech earlier today.

Jim Shannon: Obviously any advantage to industry is to be welcomed. I understand that figures released show that only 4 million people are employed in the manufacturing sector. Has the Exchequer Secretary discussed how the corporation tax changes will benefit that sector? Is the cut acceptable to the sector? Does it feel that it will achieve the recovery in that important sector? The Government have recognised it as an important growth industry, so I would be interested to hear his response.

David Gauke: I suspect that we will debate manufacturing at greater length in the next group of amendments. However, manufacturing will benefit from the package as a whole, including the changes to capital allowances. It will benefit considerably. Indeed, it is one of the sectors that pays a great deal in corporation tax. We also believe that the changes will benefit all regions. It is perfectly right for the right hon. Member for Delyn to highlight the different requirements in different regions, and as the hon. Member for Strangford (Jim Shannon) will know, the Government are exploring the case for greater flexibility for corporation tax in Northern Ireland. We continue to explore that matter.
	On the subject of jobs, the OBR, in its 2011 Budget publication, forecast that 2010-15 total employment would increase by about 900,000. That will not all flow directly from the corporation tax cut, but that reduction will play a part in it. We also have to recognise that most of the recent academic analysis—certainly a recent report published by the OECD—makes the case that taxes on corporation income are the most growth-inhibiting ways of raising revenue. They are inefficient, so it is right that we seek to have a lower rate of corporation tax to help the economy.

Andrew Love: May I press the Exchequer Secretary on the benefits for growth and potential employment arising from these measures? According to the Red Book, the corporation tax decrease in the Budget will cost £1 billion by 2015. That is on top of £4 billion from the previous Budget. However, the changes in allowances and other
	aspects of the corporation tax bring in only £2.7 billion. That leaves a significant gap. The Opposition would not be doing their duty properly if they did not ask what benefits will be delivered by that significant cut in corporation tax.

David Gauke: I am grateful to the hon. Gentleman for acknowledging that it is a significant gap. It is a considerable tax cut for businesses in order to get them to grow. Reducing corporation tax will reduce the revenue we take from an inefficient tax, thereby increasing the rate of return on investment and resulting in greater business investment, greater productivity, higher wages and salaries and more jobs. It is important that we have a dynamic private sector, and that is exactly what we are about.
	We have to be internationally competitive. Our tax system is not as competitive as it once was. Over the past decade, our competitors have seized the opportunity to cut their corporation tax rates faster than we have. In 1997, the UK had the 10th-lowest main rate of corporation tax among the 27 EU countries, but by 2010 we were 20th. As a result of the reforms announced in the Budget by my right hon. Friend the Chancellor, the UK will have the fifth-lowest corporation tax rate in the G20, and by the end of this Parliament, it will be the lowest of any major western economy and the lowest rate this country has ever known. By taking our corporate tax rate right down to 23%, we are going further in restoring Britain’s international competitiveness with a corporation tax rate 16 percentage points lower than America’s, 11 percentage points lower than France’s and seven percentage points lower than Germany’s. It will be the lowest corporation tax rate in the G7. We are pleased that we have been able to make progress in this area.

Gareth Thomas: I am sorry to have missed the many speeches yesterday by the Exchequer Secretary and in particular my right hon. Friend the Member for Delyn (Mr Hanson). I missed them because I was campaigning in west Worcestershire with 50 young people protesting against the decision of Worcestershire country council to withdraw funding from Rubery youth centre, which has played a key role in lowering antisocial behaviour in the area. Have the Exchequer Secretary or his Treasury colleagues considered the impact of the corporation tax cut on the funding of crucial public services, such as youth services?

David Gauke: I am a little disappointed that an Opposition Front Bencher should be so negative about the reduction in corporation tax, given that his colleagues seem to be more enthusiastic.

Gareth Thomas: That is not answering the question.

David Gauke: Let me make this point. The hon. Gentleman talked about being in west Worcestershire. I was there two weeks ago for a meeting with local businesses. I met manufacturers who had full order books and were expanding, investing, welcoming the opportunity to expand their businesses and recognising that the Government were putting in place the conditions for strong private sector growth. It is through such growth that we can have sustainable public finances and we can afford to have the public services that we would all like. However, it is no good spending money that we do not
	have. The move towards a lower rate of corporation tax will enable us to have stronger, sustainable public finances and a dynamic private sector. It supports the Government’s ambition to achieve the most competitive tax system in the G20, and I therefore commend clause 4 to the Committee.
	Question put and agreed  to .
	Clause 4 accordingly ordered to stand part of the Bill.

Clause 10
	 — 
	Plant and machinery writing-down allowances

David Hanson: I beg to move amendment 6, page 6, line 22, at end add—
	‘(14) The Chancellor shall publish, by 31 October 2012, an assessment of the impact of the changes to capital allowances on the UK economy.’.

Lindsay Hoyle: With this it will be convenient to discuss clause stand part.

David Hanson: You have caught me slightly off guard, Mr Hoyle. I was expecting my hon. Friend the Member for Hayes and Harlington (John McDonnell) to participate in the previous debate, but I shall plough on as ever. It is good to see you back in the Chair. I hope that you had a refreshing evening’s sleep after we had considered earlier matters.
	Clause 4, which we have just agreed without a Division, and clause 10 are inextricably linked. I hope that there will be another opportunity to discuss and probe with the Minister the impact of the proposals in clause 10, as they relate to the proposals in clause 4 that we have just approved. The effect of clause 10 is to reduce the rates of writing-down allowances for new and unrelieved expenditure from the relevant dates, which are 1 April 2012 for corporation tax and 6 April 2012 for income tax. As the Minister will know, the main rate will be reduced from 20% to 18% and, for special rate expenditure, from 10% to 8%. Special rate expenditure includes expenditure on long-life assets, thermal insulation and integral features, as well as expenditure incurred on or after 1 April 2009, with cars with CO2 emissions of more than 160 grams per km due for consideration under the clause. For chargeable periods that straddle the relevant date, the rate of the writing-down allowance is a hybrid of the rates before and after the change. The purpose of the amendment is not necessarily to oppose clause 10, but simply to ask the Government for a review of the impact of the abolition of capital allowances for smaller businesses and businesses that are more likely to invest, such as manufacturers generally.

Andrew Gwynne: My right hon. Friend is making an important point that is indeed linked with the previous clause. Clause 4 deals with the corporation tax cut, which is one side of the coin, but the other side is obviously investment. Constituencies such as mine are still heavily dependent on manufacturing industries—indeed, almost disproportionately so. Although local businesses that have spoken to me about the Budget measures have welcomed the corporation
	tax cut, they are incredibly concerned about the changes to capital allowances, which they think will serve as a disincentive for them to invest in the long term.

David Hanson: My hon. Friend makes some valid points. I know that he defends his constituency and the whole of the north-west region strongly when it comes to the importance of manufacturing industries. One issue that I want to explore with the Minister is the very question of whether the capital allowance reductions proposed in clause 10—as well as other in clauses, which we will consider in due course upstairs in Committee—will have an impact on the job creation and investment proposals that we are considering today. Unemployment in my hon. Friend’s region in the north-west will be very high, at around 9%, which again indicates the importance of generating and regenerating manufacturing industries in those areas.
	Capital allowances allow businesses to write off the cost of certain capital assets, including plant and machinery, to arrive at their business profits. Capital allowances take the place of commercial depreciation, which is not allowed for tax. There are certain first-year capital allowances that allow 100% of a business’s expenditure on specific, environmentally-beneficial plant or machinery to be written off in the year that the expenditure is incurred. There is also the annual investment allowance, which allows businesses to write off the whole of their expenditure on most plant and machinery, up to a limit in the year in which it is incurred. Expenditure on plant and machinery not covered by the allowances also attracts writing-down allowances, at either the main rate or a special rate.
	The changes in clause 10 are part of the package of corporate tax reforms announced in the Government’s 2010 Budget, as the Minister will undoubtedly explain later. The amendment calls for a review of the impact of the Government’s abolition of capital allowances for smaller businesses in 15 to 16 months—that is, October next year—when these allowances will have been operational and we can see what the growth potential in the economy has been over that period thanks to the corporation tax measures in the Budget, as well as the impact of stringent public spending cuts and rising unemployment across the UK.

Jim Fitzpatrick: In the debate yesterday evening and earlier today, there were many references from Opposition Members to the concerns raised by the British Chambers of Commerce and the Federation of Small Businesses, and my right hon. Friend has referred to the CBI. Can he say whether those organisations support the review that is being requested, and whether he has had a chance to discuss the Government’s plans with them?

David Hanson: I want to refer to a number of comments that have been made in this debate. Perhaps I could start by being helpful to my hon. Friend and referring him to what Lord Northbrook said. Lord Northbrook does not take the Labour Whip in another place or even the Liberal Whip; he takes the Conservative Whip. He considered a range of issues on Second Reading in another place, and said of this proposal:
	“How does the reduction in capital allowances square with the Government’s wishes to encourage a more manufacturing-based economy?”—[Official Report, House of Lords, 26 July 2010; Vol. 720, c. 1172.]
	That is a tempered criticism, but it raises the very question that I wish to raise with the Minister. On the one hand, to help growth we have corporation tax cuts—which the Committee has just supported, although we want to see an estimate of the outcomes—but on the other hand, we have massive reductions in capital allowances, which are specifically designed to encourage businesses to invest in plant and machinery, and environmentally efficient equipment, all of which will help to build jobs and growth for the future. However, I will return to my hon. Friend’s point in due course.
	The key reason to consider the matter in depth is that, as the Office for Budget Responsibility—the Government’s own creation—has said, even after this year’s Budget, which the Chancellor has dubbed a “Budget for growth”, growth will be lower this year and next year than it was predicted to be around this time last year, when my right hon. Friend the Member for Edinburgh South West (Mr Darling) was Chancellor of the Exchequer. Slower growth and rising unemployment will make it harder to make the deficit fall. It is therefore even more important that we encourage as much growth, manufacturing and manufacturing investment as we can, to help counterbalance the massive effects of large spending cuts, which will put many people out of work and have a knock-on effect in the private sector.
	Even after the measures in the Budget are taken into account, the OBR has said that growth will be much lower this year and next. In 2011, growth is now forecast to be just 1.7%, compared with a forecast of around 2.6% a year ago. The estimated rate of unemployment has been revised upwards to 8.2%, from 8%. Despite all the discussions and the measures that we have seen so far, there is still fragility out there. We are not sure how the economy will perform in the next 12 months, nor are we sure whether it will retain its strength and grow, or whether manufacturing investment in particular will grow. We are taking a potential risk by balancing the growth in corporation tax, which the Minister believes will occur because of the cuts that have been proposed, against the cut—admittedly of 2%, but still a cut—in capital allowances proposed by clause 10.
	The amendment simply says that at some point in the future—October 2012—we should have a break point, when we review what has happened since the allowances came into effect, which will be next year, against the corporation tax cuts, which come into effect now, and the other issues in the economy, which, although they are not before the Committee, are still relevant to this debate. As I did last night, I wish to refer to the fact that unemployment is still high across the United Kingdom. We need to grow the economy and grow manufacturing jobs, yet the cut in clause 10 may well impact on our current fragile growth. As I mentioned last night, unemployment in the UK is highest in the north-east, at 10.2%. I notice that my hon. Friend the Member for Hayes and Harlington is here, as well as my hon. Friend the Member for Poplar and—

Jim Fitzpatrick: Limehouse.

David Hanson: I still think of my hon. Friend as the Member for Canning Town; it is a habit that is hard to break. Just as I was about to say “Canning Town”, I realised that I was wrong, which is why I paused for a
	moment. In London—including the constituency of my hon. Friend the Member for West Ham (Lyn Brown)—the unemployment rate is 9.4%. London is a centre of prosperity, and it has growth in many parts, but if we are to encourage manufacturing industry in London to soak up those unemployed people and get them back into jobs and spending, it will be necessary to have an assessment of whether, downstream, the capital allowance cuts have been good or bad for unemployment rates.
	The unemployment rate in the west midlands is 9.9%. In Yorkshire and the Humber, it is 9.3%. In my own region, Wales, it is 8.7%, and in Scotland it is 8.1%. Those are high levels of unemployment, and I want the Government to make an assessment of whether the capital allowance cuts will particularly hurt manufacturing industry in the north, the north-west, Yorkshire and the Humber and in the north-east, where my hon. Friend the Member for Tynemouth (Mr Campbell) has his constituency, more than it might do in the south, the south-east and the south-west, where the unemployment level is only 6%. That level is still high—it is 100% for those people who are unemployed—but it is still only 6%, compared with the higher levels at the heart of challenging constituencies in London and in the north and north-east.

Jim Fitzpatrick: When I won the seat of Poplar and Canning Town in 1997, the level of unemployment there was almost 17%. When Labour left office last year, it was down to about 9%. That was still between two and three times the national average, but it was a lot less than it was when we won the election in 1997 because of the efforts that the Labour Government put into attacking unemployment as the scourge of our economy. My right hon. Friend is making a strong argument that unemployment is not now going to be attacked as aggressively as we would hope, because of the economic policies of the coalition Government. I would like him to continue in this vein and to outline how we think it ought to be attacked, because it is the scourge of our economy.

David Hanson: I am grateful to my hon. Friend for making that valid point. I know that he is committed to bringing jobs and investment to his part of east London, as indeed my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is to the north-west and elsewhere.
	I am not saying that we will not approve the cuts in capital allowances in due course. I am simply asking the Minister to monitor their impact, and if they are becoming detrimental, given the corporation tax cut to which they are inextricably linked, we shall need to look at how the process will continue.

Andrew Gwynne: My right hon. Friend is right to say that we shall need a regular assessment, because the regional economies do not stand alone. The decisions taken in one region might have an impact on another. An example is Mono Pumps, a manufacturing company in the Tameside area, part of which my constituency covers. It was one of just 50 schemes announced in the regional growth fund, and it is to relocate to a new facility on the Ashton Moss regional employment site in my constituency. That move is now being jeopardised because of supply chain issues with a manufacturing
	company based in Gloucestershire and south Wales. We need to ensure that manufacturing as a whole is supported across the United Kingdom, and only the kind of assessment that we are proposing will ensure that such regional disparities are properly looked into.

David Hanson: My hon. Friend makes my case for me very powerfully. I am simply saying to the Committee that these are important changes. We have approved the corporation tax cut, but we are still sceptical about whether the capital allowance cut will be a successful policy, rather than simply an addition to the public spending cuts that the Government are making across the board, which will have a knock-on effect on the private sector just as much as on public sector jobs.

Mike Freer: Just a quick question: if the higher corporation tax and the capital allowances were so valuable, why did manufacturing jobs shrink under the previous Government?

David Hanson: The hon. Gentleman will know that there are many challenges across the board, and manufacturing is always going to be a changing, moving field. In my area of north Wales, for example, manufacturing grew quite dramatically. In my constituency, we make the Airbus aeroplanes, which you will know very well from your constituency in Bristol, Ms Primarolo. That has been a major growth industry, in partnership with Government investment, Government backing for investment and Government loans and grants to help to grow the private sector and create jobs. The people who have those jobs then spend their wages in the local economy, creating further jobs in shops and in other manufacturing areas across the board. It is therefore an ever-changing field.
	I have tried to make it clear to the Minister that we support the general direction of travel on cutting corporation tax, because we do not want the UK to be uncompetitive with our neighbours. In our discussion on clause 4, I was simply seeking an assessment of how the Minister will measure the success of the provision, because we will be forgoing a considerable amount of resource and we will need to measure a success that we do not yet know. The proposal on capital allowances goes hand in hand with the proposal on corporation tax. We will be paying for that cut in part with a major slashing of investment allowances by £2.6 billion under these proposals. Again, I am simply asking for an ongoing assessment of the impact of the measure, because it might work and it might not. I fear that cutting the allowances will lead to a lack of investment, a lack of growth and a further reduction in the manufacturing industry that the hon. Member for Finchley and Golders Green (Mike Freer) is seeking to protect and develop. I want to test the Minister on these issues so that he can justify to the Committee why he is making these cuts.

Nigel Mills: The right hon. Gentleman is making an interesting case. Would he care to comment on whether any work was done by the previous Government when the capital allowance rate was reduced from 25% to 20% to determine whether that cut had the kind of damaging consequences that he now envisages with the cut to 18%?

David Hanson: To be honest, I do not know. I was not a Treasury Minister in the last Labour Government. I spent my time in Northern Ireland, in prisons, in probation and in the Home Office—[ Interruption. ] Perhaps that is not an area into which we should progress this afternoon, however. In the spirit of cross-party discussion of these matters, I acknowledge that the hon. Member for Amber Valley (Nigel Mills) has made a valid point, but, whatever the previous Government did or did not do, the economy was stronger than it is now when those cuts were made to the capital allowances. We can debate the reasons for that for a long time, and we can disagree or agree on the issues, but we now have growing levels of unemployment, slowing growth and public spending cuts that have not yet hit the public and private sectors. There are estimates that up to 500,000 people in the public sector will lose their jobs, which will have a knock-on effect on the private sector. We are seeing the squeezing of the middle in relation to child benefit and working families tax credits, and poverty and wage freezes are hitting hard.
	All those factors are going to hit the economy hard in the next 18 months to two years. The Minister is proposing to cut the capital allowances from April next year, and all we are asking in this modest amendment is that the Government review where we are in October 2012, given the tortuous procedures that we are going to go through in the next 18 months as the squeeze has its effect. The Minister will undoubtedly accept that that is going to happen, because it is part of the Government’s policy to make it happen, and we are keen to ensure that, at the end of that period, we do not lose valuable manufacturing capacity and jobs.

Andrew Love: Is not the key point here the Minister’s inability to give us hard figures on the improvement in growth and employment? Our request, through the amendment, is that we look carefully at that, because the Government are making major claims about growth in the economy as a result of these measures, as well as rebalancing the economy away from financial services towards manufacturing. Surely the amendment will give us the opportunity to test those claims.

David Hanson: Indeed. We are dealing specifically with clause 10, but it overlaps, as will be discussed further, with clauses 11 and 12. Manufacturing is a key part of our economy, but it needs support in order to fuel future jobs growth. The Government thus need to explain today and later in Committee upstairs why they are cutting investment allowances for manufacturers by about £75,000 and using that money to give a corporation tax cut that will go predominantly not to manufacturing, but to financial services industries.
	I have made a claim, and I am happy for the Minister to challenge it and to explain why the corporation tax cut we considered and agreed in clause 4 will be skewed towards the financial services industries which are not creating manufacturing jobs. I originally hoped to have clauses 4 and 10 considered in tandem as they are inextricably linked. The key issue is that the corporation tax cut is going predominantly to a certain sector, while the manufacturing capital allowance cut will predominantly hit manufacturing industry. We need to reflect on that.
	I will refer briefly back to clause 4, but it is relevant, Ms Primarolo. The Chancellor’s “Budget for growth”, which he trumpeted in March, included an additional
	1% corporation tax cut at the final moment. We know that, because the Office for Budget Responsibility said in paragraph B13 of the Budget 2011 policy costings:
	“The OBR was notified of the change to corporation tax and the 1p cut in fuel duty from 1 April 2011 too late to incorporate any indirect effect of these measures in the economy forecast.”
	If so, the capital allowances under clause 10 will come into effect with that reduction next year, but there is no assessment of whether the additional corporation tax cut, along with the fuel duty rise and other issues I have mentioned, will impact positively or negatively next year. Given the lack of thought and consultation on those issues, we need to reflect on them at an early stage, which is what the amendment says.

John McDonnell: There is anxiety about the lack of assessment; it was undertaken so perfunctorily by the OBR because it was a last-minute decision by the Chancellor. Will my right hon. Friend comment on the grounds for that decision being taken in such a last-minute manner? Was it a political stunt? Was there a rationale for it? How does he understand not just the decision itself, but the fact that it happened literally in the final 24 hours—at the last minute—before the Budget?

David Hanson: I could speculate on those points for my hon. Friend, but the Minister might be in a better position to comment on them. I will give my hon. Friend one thought, however. Perhaps the Chancellor realised that unemployment is rising because of the squeeze on public spending over the year; that growth is slowing because people feel uncertain in their jobs and businesses are not willing to invest; and that the level, depth and speed of public spending cuts over the next two years will lead to growing unemployment—not just in the public sector, but in the private sector, as people in private businesses depend on public investment. For those reasons, I suggest, the Chancellor has had to make additional changes to do what I believe is the right thing: to try to stimulate private sector growth.
	If last-minute thought has been given to the impact of corporation tax changes and if full assessments have not been made of the impact of VAT on public spending cuts, we need to be aware that capital allowance reductions are coming into effect in April next year. The amendment simply says:
	“The Chancellor shall publish, by 31 October 2012, an assessment of the impact of the changes to capital allowances on the UK economy.”
	I find it difficult to think of anybody who would object to that. I am sure that the Treasury would make such an assessment as a matter of course in any case. Any good business—and the Treasury is a good business—would look at its outputs, outcomes and impacts and reflect on how they will affect the customer base, which in this case is manufacturing industry.
	I have real concerns about the decision to reduce the rate of writing-down allowances for new and unrelieved expenditure, as I believe it could impact adversely on smaller businesses and on businesses that are more likely to invest, such as manufacturers. I say this because the Government regularly claim that small businesses are the key to future growth in the economy. Who
	depends on a capital allowance more—a very large or a smaller business? The argument I put to the Minister is that small businesses would be more affected.
	Nobody disagrees with the fact that the UK should have a competitive tax regime, and the corporation tax cut should help with that in principle. The Government are paying for it by the measures in clauses 10, 11 and 12—slashing investment allowances by £2.6 billion. The package will penalise companies that invest, particularly manufacturing companies, in order to offer tax cuts that will disproportionately benefit the banks and the financial sector. At a time when the Government claim they are rebalancing the economy by trying to encourage manufacturing, this package could—I say could—do the reverse.
	The Institute for Fiscal Studies has said:
	“The largest beneficiaries from the package of measures”—
	including corporation tax and capital allowances—
	“will be high-profit, low investment firms”,
	such as financial services, while the cuts to allowances under clauses 10, 11 and 12 will
	“have the largest impact on those firms with capital-intensive operations”,
	such as manufacturers. That is a direct quote—from page 229, for the Minister’s reference—from the IFS Green Budget 2011. The IFS also agrees:
	“The losers would be firms that invested heavily but made little profit—notably in the manufacturing and transport sectors but also some capital-intensive service-sector firms. The winners will be less capital-intensive but more profitable firms, historically typified by the financial sector.”
	I do not know whether it will pan out like that in real life, but my point is that if it does, clauses 4 and 10 together will mean giving a corporation tax cut that benefits the financial services sector most and a capital allowance cut that damages the private sector of small and medium-sized manufacturing industries most. That cannot be a good recipe for growth in the economy.

Andrew Gwynne: One of my concerns is that as we try desperately to rebalance the economy, we need to invest in some of the new high-tech and emerging industries, particularly in the renewable energy sector, which is incredibly capital-investment intensive. Does my right hon. Friend worry, like me, that these changes could put off growth in that emerging technology?

David Hanson: My hon. Friend makes a valid point, as it is exactly those companies that require capital investment support. The move will penalise companies that invest in manufacturing—for example, the car industry, advanced manufacturing, wind turbine manufacturing, and research and development across the board. These big manufacturing concerns are going to create the jobs of the future as well as protect current manufacturing jobs at a time when consumer demand might well be fragile because of high levels of unemployment, high levels of public spending cuts and general concerns about the squeeze on the economy and on people’s living standards and incomes generally.
	PricewaterhouseCoopers has said:
	“Many clients will balance the modest reduction in the capital allowances rates with the staggered reduction of the rate of Corporation Tax…Whilst the declining rates of capital allowances,
	in isolation, do not produce any winners, some businesses will benefit when the CT rate change is also taken into consideration. Capital intensive businesses”—
	this is the key point—
	“are likely to feel the reductions more, since they will have larger capital allowances pools.”
	Deloitte has said:
	“For some businesses the reduction in writing-down allowances for plant and machinery will be offset by the reduction in the main rate of corporation tax from April 2012.”
	We accept that.
	“However”—
	and this is the key point—
	“capital intensive companies…may not benefit to the same extent.”
	In its response to the Treasury Committee in the tax experts’ report on the Bill, the Chartered Institute of Taxation reported:
	“The various changes to capital allowances do not score well under coherence”—
	its key test.
	“The changes to short life assets seem to be an attempt to solve problems created by the reduction in writing down allowance rates at a cost of increasing administrative burdens. It would be better to have a proper long-term commitment to capital allowance rates. Reducing capital allowances to 'pay' for corporation tax rate cuts penalise unincorporated businesses and make the business tax system look as if it is lacking coherence.”
	I am not arguing that we should not undertake those capital allowance cuts. There may or may not be such an argument to be made, but what worries me is the overall impact of those cuts when married to the corporation tax cut. I am simply asking the Government to make a continuous assessment. I am asking them to publish an assessment six months after the implementation of the capital allowance cuts in April next year and, during the run-up to their implementation, to monitor the economy as it is now, so that we can establish whether they are on the right track.
	In a report published yesterday, the Association of Chartered Certified Accountants said that
	“it should be borne in mind that for large businesses with significant investment in plant and equipment, any changes to the tax cost of those assets will impact on long-term investment plans.”
	I do not know whether that statement will prove to be right or wrong. I am simply saying to the Minister that he should reflect carefully, monitor the situation, and report back to the House. In October 2012, we will have experienced six months of the capital allowance regime and 18 months of the corporation tax cuts. We need to ensure that we are indeed on the right track, and that growth has not been hampered by the Government’s measures.
	I should like to know what consultation took place and with which business organisations. I suspect that the consultation was not as thorough as it might have been. Will the Minister tell me with whom he discussed the proposals, when he discussed them, what the responses have been, and what he considers to have been the response across the board from capital-intensive businesses since the announcement in the Budget? When we deal with clauses 11 and 12, I shall want to know whether there was any adverse reaction to them.
	I suggest to the Minister that there should be an assessment of the long-term position. I hope he will accept that the amendment is designed not to torpedo his proposals, but simply to express our concern about certain aspects of the configuration between the corporation tax cut proposed in clause 4 and the capital allowance cut under clause 10 and the clauses that we will consider later. I ask him to place a flag in the sand signifying that after a period the Government will review the impact of those cuts to establish whether the fears expressed by people including my hon. Friends and me are materialising. We hope that they will not materialise, but if they do, we shall need to consider how to change track in due course.

Nigel Mills: It is with a small amount of pleasure that I rise to speak about tax issues, having spent 13 years advising companies on them, mostly under a Labour Government. It was kind of the right hon. Member for Delyn (Mr Hanson) to mention my two former employers and the various comments that they have made, which I happily endorse.
	I want to comment on the request for a review of the proposed reduction in capital allowances partly because I think that we are in a strange position overall. The purpose of capital allowances is to give businesses tax relief on their capital investment in order to encourage them to invest in plant and machinery. We used to try to encourage them to invest in industrial buildings and factories, but we have stopped doing that now.
	The attraction of the capital allowance system used to be the ability to incentivise people by accelerating tax relief. Forty years ago someone who invested in a piece of equipment with a 10 or 15-year useful life could accelerate the tax relief on it quite far in advance of the overall spread of its useful life, but I am not sure that that is where we are now. How many businesses in our constituencies will invest in equipment when they are not certain that its useful life will be even 10 years? If they expect it to be five or six years, the present mechanism will not work at all.
	A simple calculation will show that, given an 18% writing down rate, an investor will still not have received tax relief on 30% of his investment in a piece of equipment. After eight years, he will still have not have received 20%. He may anticipate a fairly large residual scrap value if he can sell the equipment on, but that is on the assumption that a good deal of its useful life remains, and I am not sure how realistic that assumption is.
	If we are to have a review, let us review the whole capital allowance system to establish whether it is really giving businesses an incentive to invest. Perhaps we should have a look at what they are actually doing in their accounts. The right hon. Member for Delyn mentioned that. What is the useful life over which they are writing off assets? I think that we may be adding a huge amount of complexity to the system by preventing all the businesses in the country from employing actual accounts depreciation for this purpose, and requiring the creation of a capital allowance pool requiring all the assets to be tracked separately. In the past it was said that businesses were receiving a tax incentive, but this huge and unnecessarily complex system may have an adverse impact on them. Our review should ask whether the capital allowance regime is the right one.
	Later—not today—we will come to clause 12. The Government have responded to some lobbying, and have recognised that it will cause huge problems for manufacturing business in particular. The clause proposes that the lives of short-life assets should end after eight years. Someone who invests in equipment whose life he expects to be less than eight years will have to make a separate election to treat it as a short-life asset rather than putting it in his main capital allowance pool. He can try to obtain the tax relief over the eight years; otherwise, as I have said, he will still have 20% unrelieved. We are building additional complexity into the system, and I am not sure that that is necessary.
	The Bill contains various responses to businesses that are trying to find ways around the capital allowance rules. Clause 33, for instance, proposes anti-avoidance rules for long-funding finance leases. Year in year out, we see new and complex rules intended to prevent businesses from getting around the rules. Sometimes they are trying to obtain extra deductions to which they are not entitled, and sometimes they are trying to find ways of receiving a deduction over the period for which they think they should receive it.
	If we are to be a tax-simplifying, tax-reforming Government, perhaps the Office of Tax Simplification could conduct a review of whether the capital allowance is still fit for purpose, and whether it is the right way to attract business investment over the next 10 or 15 years. Should we, in fact, try to find a way out of it, and adopt a system that allows businesses simply to look at their accounts to be eligible for some kind of tax relief, rather than having to adjust the depreciation for those assets? I know that that too will be complex, because there will be a huge hangover from the existing system, and there will be problems when people try to accelerate relief over far too short a period. However, I think that all those problems can be addressed, and that we shall be able to stop increasing the complexity of the system.
	I cannot vote for the amendment, because I think that it is merely an excuse for a debate. If we are to have a review, let us have a proper one.

Andrew Love: In recent years there has been a move in all western countries to reduce the headline rate of corporation tax and widen the tax base, and that is what has been proposed in the Budget. Does the hon. Gentleman support that move?

Nigel Mills: If we want a competitive corporate tax system, the tax rate is key. However, we probably need to examine four things, which include the tax base, as the hon. Gentleman said, and the complexity, stability and predictability of the system. We are in danger of just ticking the first box; I am not sure we are ticking the tax-base box well with this approach, and we are adding extra complexity. Many regimes around the world do not have capital allowances but do let businesses take the depreciation that they see in their accounts. That is a far more attractive, simple and predictable system, because businesses would not think, “I might invest in this piece of equipment, but they might reduce this to 15% in three years’ time and my relief suddenly starts to look different.” As the hon. Gentleman was trying to say, this involves a combination of things. We
	need to get not only the rate right, but the base and the underlying system right; we will not get all the advantages from simply reducing the rate.
	However, for most businesses the first headline comparison is about the overall tax rate, so that is the main thing to focus on. I am not going to vote against this rate reduction. Paying for the reduced rate partly by reduced capital allowances is the right way to go in this financial situation, but we need to go in the direction of simplifying our incredibly complex corporate tax system. We can all work out the statistics by saying, “When I started work 13 years ago, my tax legislation was so big and when I left a year ago it was much bigger, and I have not even got the VAT and inheritance tax book.” We can look at how many schedules on income—actual capital—we have and consider how many of them we actually need. The capital allowance regime is part of that problem, because it was written 50 or 100 years ago, when it actually worked. A lot of these things are out of date, so we must look to simplify things if we want to ask businesses to invest. I am not sure that they are going to worry about whether something is at 18% or 20%, but they do want tax relief for their investment over the useful life of their asset provided in a way that is simple for them to manage. I am not sure that we are anywhere near providing that at the moment.
	A lot of my clients use the capital allowances regime to add flexibility to how they get tax relief in the years when they have profits and in the right entities in which they have profits. They will not entirely welcome my idea of simplifying this system and taking all that away from them. However, if we are to get a modern, competitive corporate tax system, it must be simple and easy to understand. It must also do what we want it to do: incentivise the investment that we desperately need to have a growing economy.

John McDonnell: I have a fair amount of sympathy with the hon. Member for Amber Valley (Nigel Mills), because if he ever wants to return to his former profession he may well find that he has lost a number of clients as a result of that speech.
	The linkage between clauses 4 and 10 is inevitable, as my right hon. Friend the Member for Delyn (Mr Hanson) said from the Front Bench, because the corporation tax reductions are being paid for by these cuts in capital allowances. I do not want to upset the consensus that has emerged on the cuts in corporation tax, but I do not support them and believe that they will be an error in the long run. I address the issue of capital allowances in that context.
	I am unclear as to what the Government’s strategy is on stimulating the economy to tackle the recession in a way that rebalances the economy. I thought that this was not just going to be a rebalancing between the public and private sectors. I listened to some of the statements made by the Chancellor and the Secretary of State for Business, Innovation and Skills about rebalancing the economy as between the finance sector and the manufacturing sector, which gained support across the House. We heard about the development of a manufacturing strategy that would enable us to have a balanced economy between the finance, manufacturing and service sectors, so that if there was a crisis in one sector, the whole economy would not collapse as a
	result of overdependence on that sector. However, these Budget measures seem to fly in the face of that balanced approach.
	A number of methods can be used to re-stimulate the economy, one of which is tax cuts, including corporation tax cuts, as have been introduced in this Bill. Another method is the more directional approach of considering a form of tax cuts through the capital allowances, whereby the Government try to influence economic behaviour in a way they believe to be beneficial. The other method is to invest in largely capital expenditure through public services—I am talking about public investment.
	Let us deal with the formation of policies through this Bill. I am anxious about the fact that clause 4 cuts corporation tax almost as an act of faith, in the belief that that will translate into investment, the stimulation of the economy and, thus, more jobs. Very slight evidence has been produced to suggest that that will happen. My right hon. Friend the Member for Delyn has mentioned the range of debate that has taken place in the Treasury Committee and elsewhere, and the evidence that has been produced by some witnesses, but it is fairly slight. The addition of a further 1p cut in corporation tax at the last minute—again, the Office for Budget Responsibility did not even have time to assess it properly—demonstrates that the calculations have almost been done on the back of a fag packet. This smacks of something that other Chancellors have been prone to in the past: a last-minute political stunt just to surprise us on Budget day. Paying for that cut by cutting capital allowances flies in the face of the argument that the Chancellor and the Prime Minister have put forward in the past about ensuring that we stimulate the manufacturing base to rebalance our economy.
	I also find it worrying that the capital allowances are paying not only for the cuts in corporation tax more generally, but for the cuts in the treatment of the taxation requirements on multinationals. The briefing that we received from the House of Commons Library contains a quote from Mr Peston of the BBC about the treatment the Government are proposing for controlled foreign companies. The rules mean that there will be a 5.75% levy on cash held by multinationals in non-trading entities overseas and a low rate of tax, whereas various commentators thought it would be 8%. These are the same multinationals who
	“stash cash in tax havens and low-tax countries.”
	What seems to be happening is that UK companies that are struggling to obtain loans from banks, in the first instance, to invest in capital equipment to stimulate the local economy, and therefore jobs, and thus have an impact on the economy nationally are having their capital allowances cut so that we can reduce the rate that was intended to be introduced for tax multinational companies, which are avoiding, or evading, tax through the use of tax havens. That contradicts the statements that the Chancellor has made for some time.

David Hanson: May I assure my hon. Friend that we will return to those clauses in some detail?

John McDonnell: As my right hon. Friend said earlier, all these clauses are linked and it is difficult to disaggregate them. Clause 10 is certainly being used a mechanism to
	fund the allowances being distributed to companies overall. As I say, I find it extremely difficult to link that to the rationale that has been given by both the Chancellor of the Exchequer and the Prime Minister in the past.

Jim Fitzpatrick: One of the biggest elements of British manufacturing is the food industry. When I was a Minister of State in the Department for Environment, Food and Rural Affairs, the National Farmers Union lobbied me aggressively. Consequently, I lobbied the Treasury, as DEFRA does, about capital allowances in respect of buildings and equipment for the farming community. Has my hon. Friend had a chance to talk to the NFU about the comments he is making? Has he any understanding about whether it is being penalised in order to assist transnational corporations from outside the UK? Is this being done instead of supporting British manufacturing and British business people?

John McDonnell: Strangely enough, given that I represent Hayes and Harlington, an urban area, I do not have an awful lot of engagement with the NFU, although my area does still have one farm left in it. I have an engagement with Hillingdon chamber of commerce—I am meant to be hosting its annual parliamentary lunch at the moment—and a number of its members have explained to me their concerns about the impact on small firms. I share the view of the hon. Member for Amber Valley: capital allowances should not be used just as mechanisms to be manipulated in years of high profit. There is a need for an overall review of capital allowances, but I find it unacceptable to cut them in the short term to pay for corporation tax reductions and for the beneficial treatment of multinational corporations. That is why I support the amendment, which is fairly mild-mannered and simply asks whether we can reconsider the matter.
	As my right hon. Friend the Member for Delyn said, I would expect a wise Government to have the Treasury carry out such an assessment regularly. The amendment asks for that process to be more open and transparent and for it to be reported to the House so that we can have a full and thorough debate. I hope that the Minister can assure us that he can at least give us some line of reporting on the implementation of the policy over the coming period.
	It worries me that as we cut capital allowances, which will reduce corporation tax in this country, we will get into a cycle just like that in the 1930s with an internecine battle between countries about reducing corporation taxes. That will lead to a policy of beggar thy neighbour in order to secure some short-term gain in the form of overseas investment in the UK. I do not believe that that is the solution and I think it will be found to be counter-productive in the long term, even though there might be some short-term gains to tide the Government over for the next 18 months, if they survive that long.
	I believe that the Government are mistaken in bringing forward this process of corporation tax reduction. If we are paying for that through the capital allowances changes, we will divide industry and the private sector. A large number of small firms, particularly in the manufacturing sector, will lose out and will not gain sufficiently as a result of the corporation tax cuts. Other areas of the economy, particularly the finance sector, will gain yet
	again and yet more anxiety will be expressed in the private sector about the Government’s divide-and-rule policy.

Andrew Gwynne: Is it not worse than that? Many of the small manufacturing industries in my constituency have been dependent on an old declining style of manufacturing. The capital allowances were the mechanism that they used to diversify. On my hon. Friend’s point about rebalancing the economy, if we are to do that in areas that are heavily dependent on manufacturing industry, we must allow them to diversify into the new technologies and new manufacturing sectors.

John McDonnell: That is exactly the point that my right hon. Friend the Member for Delyn made and that I wish to reiterate. Capital allowances were introduced as a method of the Government’s trying to shape behaviour within industry as best we could. They were a way to stimulate sectors of the economy, but they have also been used to stimulate innovation. The Government are committed to the stimulation of the green economy and I, like other Members on both sides of the House, deeply regret the Government’s failure to act sufficiently swiftly to establish the green investment bank and to get it up and running, but that is a subject for another debate.
	The role of capital allowances, particularly in the environmental field, could be key and cutting them with this broad-brush approach will deny the opportunity to the environmental industries, particularly those involved in the development of renewables, to become world leaders as the Government envisaged that they would in the coming period, an idea that we all supported. This is my right hon. Friend’s point: if a review of the impact of the capital allowances were linked to the disastrous corporation tax policies overall, we would have the opportunity to consider the implications sector by sector and industry by industry as well as the design of the appropriate mechanisms, allowances or other things to stimulate those sectors of industry.

David Hanson: Does my hon. Friend accept that one key factor is the lack of a focus on outcomes in the consideration of the impact of the changes in both clause 4 on corporation tax and clause 10 on capital allowances? One key thing that the review would do, if we can secure from the Government today an aspiration to find out what the changes will mean for real jobs and the manufacturing industry, is test in 18 months’ time whether those changes have been successful.

John McDonnell: Let me put it this way, as mildly as I possibly can: we hardly have a description of evidence-based policy making before us. Let us go back to the example of the additional 1p cut given by my right hon. Friend. When the Treasury Committee considered the matter, it invited evidence and Paul Johnson, the director of the Institute for Fiscal Studies, was questioned about the impact it would have. He said that we did not know about that with any precision. We do not know with any precision what the impact of the overall cut in corporation tax will be and we certainly do not know with any precision, globally or sectorally, what the impact of the
	capital allowances cuts will be. We are stepping into the dark and going down the wrong path and that is why we should have the review.
	I fear that a number of companies might have planned their development in advance based on the capital allowances that they thought were secure and would be forthcoming because of the statements of the previous Government as well of the Chancellor of the Exchequer over the past 12 months. They will now not proceed with that investment and as a result, the companies might not be put at risk but they will certainly not expand in the way that they planned and that will have consequences for jobs. In certain areas—my right hon. Friend has mentioned at great length the higher unemployment rates in certain regions—the effects on individual communities will be fairly catastrophic if this job growth does not go ahead.
	I oppose the reduction in corporation tax, as I think it is misguided. I would prefer it if, instead of cutting taxes to companies and forgoing that income, we could use the income from the top companies and corporations to invest in public infrastructure projects that will get people back to work and stimulate the economy overall. The last thing I would suggest the Government should do, even if they are cutting corporation tax, is pay for that cut with cuts in capital allowances. In my view, that flies in the face of everything that the Government have said about rebalancing the economy, stimulating the manufacturing base and shaping behaviour so that there is a longer-term view of investment in the capital and manufacturing infrastructure of this country based on security and the knowledge of the income that a company will have to invest in the future.
	Even if the Government cannot withdraw these provisions on the cuts in capital allowances and reconsider those on the corporation tax, I urge them at least to allow us to reconsider the matter within 18 months, as the amendment says, to see the implications overall. I honestly do not understand the fear within Government of having an open examination of this matter within that time scale. If I were a Minister, I would welcome it. If I were an advocate for this policy, I would welcome the opportunity to come back in 18 months or so and, if necessary, to gloat at its success. I certainly would not want to feel that I was on the run and hiding from the consequences of the decisions that I had proposed in a Finance Bill of this nature.

Andrew Love: I echo the final comments of my hon. Friend the Member for Hayes and Harlington (John McDonnell) about the amendment. It mentions capital allowances—that is what we are discussing—and the impact they will have on the UK economy is of particular concern at the moment.
	We must comment on the backdrop to this debate, as the economy has stalled over the past six months. We had a very bad final quarter of 2010 and although things improved in the first quarter of this year, the reality is that everyone was expecting much larger growth in the first quarter to compensate to some extent for the lack of growth in the final quarter of last year. If one reads what the commentators and forecasters have said, one sees that there is genuine concern, which is reflected in the figures provided by the Office for Budget Responsibility. The predicted growth rate has gone from 2.6% to 1.7%, but that figure might already be out of date, so there could be further reductions in the rate.
	It is suggested that unemployment will go up from 8% to 8.2% but, just as other Opposition Members have reflected on unemployment in their areas, I note that unemployment in my constituency is 9.3%, which is just under the London average. With the best will in the world, it is quite hard to see how we are going to turn the corner against the backdrop of what is happening internationally. One point that I think will hit home harder about the Government’s strategy is that the reductions in growth rates and the increases in unemployment mean that there will have to be an additional £43 billion-worth of borrowing over this Parliament at a time when the Government are telling us that the overwhelming strategy is to reduce the deficit.
	The Government’s recent paper on the growth strategy also forms part of the backdrop. It would not be hyperbole to say that there has been widespread dismay about the report because it does not contain the germs of ideas that people can reasonably hope will have an impact on the growth of the economy. As far as enterprise zones are concerned, we have been here before: they shift employment around their local region but they do not make a great contribution to growth or employment creation. On the national insurance holiday for small companies outside London and the south-east, we understand from a report in the Financial Times that it is unlikely to measure up to the claims that were made for it when it was introduced last year. Whether it is because of bureaucracy or other problems, it is not being taken up by small businesses and the reality is that it is not going to contribute to strengthening our growth rate.

Andrew Gwynne: My hon. Friend is making a good start to his speech by setting out the background. Not long ago, when the Chancellor was promoting his Budget and introducing the measures that my hon. Friend is talking about, he did so on the basis that it was a Budget for growth. However, do not the OBR’s forecasts show that even with the measures in the Budget, growth is predicted to be lower than it would have been had Labour’s plans remained in place?

Andrew Love: Absolutely. One has to question, as I am doing, the Government’s whole strategy, which they call a growth strategy but which does not appear to be delivering what we would expect from a proper growth strategy. Indeed, the previous Government’s growth strategy produced a far better result, as I shall discuss in a moment.
	I want to cover two other issues that have caused quite a lot of surprise and concern in relation to the Government’s policies. First, on construction, the first quarter growth figures for this year show one glaring and prominent inadequacy is in construction activity, which is going down rapidly. If we add to that the incoherent policies that the Government are pursuing on house building, planning consents and oiling the wheels of the construction industry’s infrastructure, one can only be very gloomy about the prospects for the next year or two.
	Secondly, I will mention manufacturing because it would be part of the report that we are suggesting the Government should produce. Manufacturing did rather
	better than I had suspected it would in the first quarter. Internationally, it seems to be delivering some of the changes in net exports that all the economic forecasters suggested, but we need a much more growth-oriented manufacturing sector if we are to bring about the changes that will be necessary if the changes in capital allowances are to go forward.
	Those considerations lead me to conclude that the Budget proposals before us—the reduction in the headline rate and the compensatory measures widening the tax base to pay for that—are the main thrust of the Government’s growth strategy in real terms. The Government suggest that those measures will help to rebalance the economy. I look at all issues as objectively as I can and I have to say that, given the measures being undertaken in the comprehensive spending review in relation to the public sector, we certainly need to do something to boost the private sector. We are told that the measures will do that, but will they? That is the question being addressed in the amendment.
	The Minister and the Chancellor have told us that a lower rate of corporation tax should act as a signal that we are open for business. There is some evidence that that approach has worked previously to a limited extent, but the question is whether it will work in the current economy. I am not a sceptic but, like the shadow Minister, I would like to see some Government projections about the number of businesses they expect to come from other countries either to expand existing operations or to start new ones here as a result of that signal.
	In his Budget statement, the Chancellor proclaimed from the Treasury Bench that we have
	“the lowest corporation tax in the G7”—[Official Report, 23 March 2011; Vol. 525, c. 955.]
	but we already had the lowest rate of corporation tax in the G7. If all we are trying to do is send a signal, surely we could have proclaimed that. There is also the wider Group of Twenty to consider. Looking at countries such as Ireland we must ask whether it is feasible and rational for our strategy to be to compete with that in Ireland. As we know, there is debate in Northern Ireland about whether corporation tax should come down to the level in the rest of the island. There is genuine debate about that, but I do not think it is being suggested that we want to compete with Ireland. We compete with the major G7 economies and our rate is already below theirs. The cut in corporation tax will re-emphasise that, but what we would like to know from the Minister is what benefit that will deliver to the British economy.

Andrew Gwynne: Is it not a fact that for the international companies seeking to invest inwardly in the United Kingdom, corporation tax is only one small part of the overall picture? They are looking at much more than just the headline tax rate.

Andrew Love: Yes, absolutely. If we look at business investment, which in some senses reflects how optimistic employers, manufacturers and other parts of the economy are about the future, we will see that we have not had the increase in business investment that all the forecasters, economists and coalition politicians have been telling us we should have. That reflects the wider issues in the economy that should be of such major concern. We cannot expect a cut in corporation tax to solve all the problems, but the merit of the amendment is that it
	proposes that the Government try to indicate how much additional growth and employment will be created as a result. In the previous debate, the Minister suggested that a cut in corporation tax would boost investment.

Dawn Primarolo: Order. I appreciate that the Government themselves have said that corporation tax and capital allowances are part of a package, and I have therefore allowed a linked debate, even though we have finished debating corporation tax. However, the hon. Gentleman needs to focus a little more on capital allowances, which are the subject of the amendment.

Andrew Love: Thank you for your guidance, Ms Primarolo. I will move swiftly on to capital allowances. The Government have discussed the need to widen the tax base and they have told us that reducing capital allowances is partly a method of paying for the cut in the headline rate. As I mentioned in an intervention, that phenomenon has been apparent in most western countries in recent years and, indeed, all the economists project that there will be much greater competition in business taxes. Corporation tax is likely to continue to come down, and the reduction will be partly made up by widening the tax base.
	Like my right hon. Friend the Member for Delyn (Mr Hanson), I am prepared to consider the changes to capital allowances, although I am concerned about the cut in the annual investment allowance from £100,000 to £25,000. I am perfectly happy, however, to look at that if we are reassured that the proposal in the amendment will make a significant difference. As has been said—and I have said so myself—the Office for Budget Responsibility added a rather sceptical note to the debate by suggesting, even though it had been informed at a late stage of the 1% cut in corporation tax, that that would not have a great impact on growth.
	Finally, I want to focus on the issue of who will benefit from the changes to capital allowances. As a number of Opposition Members have said, high-profit, low-investment companies will be the main beneficiaries of the package, which is unfair and, if I may say so, will not achieve the rebalancing of the economy that the Chancellor has promoted for a considerable period, away from financial services towards the manufacturing and production of export-oriented goods. The change militates against all that. In particular—and I refer to the cut from £100,000 to £25,000—it will penalise manufacturing, particularly businesses with high capital costs. My right hon. Friend the Member for Delyn mentioned the motor industry and others, but I am concerned, because I have a number of small, capital-intensive manufacturers in my constituency. Sadly, they are only a remnant of the manufacturing sector that we had 25 or 30 years ago, but we need them and we need to promote them. I am therefore worried about the Government’s proposals.

Andrew Gwynne: My hon. Friend has been incredibly generous in accepting interventions. I am not sure of the extent of the manufacturing base in his constituency, but I imagine that it is pretty similar to mine. Small manufacturing industries tend, as he said, to be a remnant
	of the larger-scale manufacturing that once operated in our constituencies. Does he not regard the capital allowances scheme as a mechanism for manufacturing industries, however small, to diversify into the new sector?

Andrew Love: I agree. If we take the coalition at face value, it has suggested that we need a vibrant small business and manufacturing sector, much of it consisting of small businesses. I would think that it would want to promote that by incentivising it through the taxation system. One wonders whether the measure would achieve that. I do not want to suggest, without any concrete figures, that that will in fact happen. We urge the Government to produce those figures, so that we can all make a judgment. Indeed, they can make a judgment about whether their policy has achieved their objectives.

Jim Fitzpatrick: My hon. Friend, like most of the speakers in this debate, is generously supporting the modest amendment tabled by our right hon. Friend the Member for Delyn. It does not attack what the Government are trying to do; it is just asking for
	“an assessment of the impact of the changes”.
	We are therefore giving the Government the benefit of the doubt, as their proposal may well be beneficial and positive. As my right hon. Friend has said, the Treasury will examine, monitor and scrutinise the impact of the measure on businesses, so what is wrong about publishing an account as suggested by the amendment?

Andrew Love: I agree, as other Members do, that that is not an unreasonable request. If the Government choose not to support the amendment, are they concerned about the impact of capital allowances and the prospects for the UK economy? One wonders whether they do not want the debate that would ensue in 2012 when, if we are to believe Government figures and the OBR, the economy should turn a corner. That would be an appropriate time at which to carry out that investigation.
	There are 5 million small businesses in this country, and it is a symbol of the unity that we occasionally achieve in the Chamber that Members from all parts of the House recognise the role that they play now and, importantly, in future. If we add to the impact of capital allowances on small businesses the failure of the banking system in this country to provide the credit necessary to expand the sector, I wonder whether we can achieve all that the Government hope to achieve through the shift from public sector to private sector activity. I merely raise that as an additional issue, but I hope that the Government will address the credit needs of the small business sector a little more robustly. That is what underpins the amendment.

John McDonnell: I apologise, Ms Primarolo, for leaving the Chamber earlier. Should there not be some consultation of small businesses in particular so that they could describe the nature of the investments that they would forgo if they failed to secure the capital allowances that they normally secured under previous regimes? That would allow the Government to assess the overall impact of the loss of those investments to sectors of industry and on employment overall.

Andrew Love: My hon. Friend makes my point. That is exactly why, once the changes have been introduced, we need to review and assess their impact, particularly on
	small businesses and more generally on the economy. We would like to be reassured that the headline rate cap with the changes to the allowances will make a material and positive difference to the economy.
	I commend the amendment to the Committee and in particular to the Minister. I hope he will consider carefully what is asked for and agree that it is a constructive amendment that he can support. I hope that together we can make a real difference to the prospects for the UK economy.

David Gauke: Amendment 6 would require the Chancellor to publish by 31 October 2012 an assessment of the impact of the proposed changes to capital allowances on the UK economy, as we have heard. The amendment was tabled to clause 10, which reduces the rates of writing-down allowance on the main rate pool of plant and machinery expenditure to 18% and on the special rate pool to 8%. Before I deal with the amendment, I will explain the purpose of clause 10, which is key to the amendment.
	Capital allowances allow businesses to write off their expenditure on capital assets, such as plant and machinery, against their taxable income. They act as a simple, statutory system in place of commercial depreciation. Capital allowances are given at different rates, depending on the year of investment and the type of asset acquired. The principal year-on-year allowance for plant or machinery expenditure is the writing-down allowance. The main rate is currently 20% per annum, and the special rate is 10%.
	Both are calculated on the reducing-balance basis. We are making changes also to the annual investment allowance, in clause 11, reducing it to £25,000, as we have heard, and extending the short-life assets regime from four to eight years, in clause 12.
	The changes announced last year, which are given effect by clauses 10 and 11, enable a reduction in the main rate of corporation tax, which will reaffirm Britain’s competitive tax system and support enterprise and growth. The right hon. Member for Delyn (Mr Hanson) was right to highlight the fact that this is part of a package. In his earlier remarks, the hon. Member for Edmonton (Mr Love) pointed out that this was a partial contribution. There is none the less a gap, and further funding has been found—from the bank levy, for example—which has enabled us to reduce the corporation tax rate.
	We have already debated the benefits of reducing the corporation tax rate and we have returned to that topic to some extent in the present debate. I note that it does not have the support of all hon. Members, although it is supported by the Opposition Front-Bench team. It is helpful to repeat what was said by John Cridland, the director general of the CBI:
	“The extra 1p cut in corporation tax will help firms increase investment.”
	The objective is not just to reduce the amount of tax that companies pay, but to enable them to invest and grow businesses in the United Kingdom. I am pleased that that is welcomed throughout much of the Chamber.
	Our initial assessment of the package as a whole suggested that that would lead to an additional £13 billion of business investment by 2016 by making the cost of capital investment cheaper. The additional reductions in corporation tax rate and the extension of the short-life
	assets regime will help to increase further the levels of investment by business. We estimate that the overall effect of these measures will be to reduce the tax liabilities of the manufacturing sector by around £700 million by 2015. The changes to the rates of writing-down allowances do not mean that businesses will not continue to receive full tax relief for their investments in plant and machinery. Rather, the relief will be over a slightly extended time frame.
	Let me give an example. Where it would have taken 11 years under the current rate to write off more than 90% of the cost of a machine, it will now take 12 years. Meanwhile, the rates will continue to align broadly with average rates of depreciation across the economy. This does not mean that we intend to remove capital allowances in favour of pure accounting depreciation.
	On the issue raised by my hon. Friend the Member for Amber Valley (Nigel Mills), the previous Government did consult in some detail on their reform of corporation tax between 2002 and 2004. I am sure you remember it well, Ms Primarolo. The business response to that consultation was strongly in favour of retaining capital allowances. It was argued that capital allowances provide certainty and a level playing field, with the same rates of allowances applying to all. The flexibility of the system allows the pooling of expenditure and the ability to claim less than full allowances, depending on the individual’s business circumstances. My hon. Friend set out the case for a different approach to capital allowances. He brings great expertise on the matter and there is ongoing debate, but we do not intend to reopen discussion of that point.

Nigel Mills: I am grateful to my hon. Friend for reminding me of that study from almost a decade ago. I gently point out to him that the rate of capital allowances was quite a bit higher at the time of the study. If he did the same exercise now, he might get a slightly different answer.

David Gauke: Again, my hon. Friend raises an interesting point. We look forward to receiving any representations that he may wish to make on that. He is right to say that the rate of capital allowances has changed since 2004, and he highlighted in an intervention the fact that the previous Government—as I am sure you will recall well, Ms Primarolo—reduced writing-down allowances in 2007, a point that my hon. Friend made to the right hon. Member for Delyn.
	In response to those Opposition Members who raised their concern about the approach that the Government have been taking, I point out the approach taken by their Government in the previous Parliament, when they were all Members of this place. Whereas we are reducing the writing-down allowance from 20% to 18%, the previous Government reduced it from 25% to 20%. In our case that is a contribution towards reducing the main rate of corporation tax from 28% to 23%. The previous Government reduced it from 30% to 28%. Ours is a much more generous package for business and as a consequence a much better package for manufacturing than that contained in the 2007 Budget, where essentially the entire reduction in corporation tax from 30% to 28% was paid for by the reduction in the writing-down allowance from 25% to 20%.
	On amendment 6, the Government are fully committed to providing greater transparency on the impact of tax measures. I am sure Opposition Members have examined the tax information and impact notes that we published on 9 December relating to clauses 10 and 11, and the additional note that we published at Budget in relation to clause 12. It is clear that there is no need to publish a report into the impact of the capital allowances changes. We have provided a great deal of detail already, but for those hon. Members who have not had the opportunity to read the published notes, let me provide a brief summary.
	The note states:
	“The OBR assessment of the package was that the cuts in CT”—
	that is, corporation tax—
	“rates more than offset the reductions in investment allowances”,
	and that the businesses affected
	“will benefit from related reductions in the rates of CT.”
	As I said earlier, we expect the overall effects of the cuts in corporation tax rates and capital allowances changes to lead to an additional £13 billion of investment, and the additional changes to increase that further.
	Although this is not strictly in scope, as the amendment is to clause 10, I hope I may be allowed to make a few comments about the other changes to capital allowances in the Bill, to which we shall return in Committee upstairs. The reduction in the annual investment allowance to £25,000 is estimated to affect between 100,000 and 200,000 businesses. As the tax information and impact note clearly states, however:
	“The CT reform package will promote higher levels of business investment than would otherwise have been the case.”
	Further, more than 95% of businesses in the UK will be unaffected, as the qualifying capital expenditure will continue to be completely covered by the annual investment allowance, so companies, be they small, medium or large, will benefit from the CT cuts, including the cut in the small profits rate in clause 5, while most unincorporated businesses, which by their nature tend to be the smallest businesses in the economy, will still have their expenditure covered by the annual investment allowance.
	Clause 12 contains changes to the short-life assets regime, which will enable a business to obtain allowances that equate to the actual depreciation of the asset over the period of actual ownership. That change was described by Terry Scuoler, the chief executive of the Engineering Employers Federation, the country’s leading manufacturing organisation, as a change that
	“will make the tax system more efficient and remove in part barriers to investment.”
	The change will better recognise the cost to business of investing in modern machines with shorter lives.
	I can understand the right hon. Member for Delyn wanting to table an amendment calling for a report. It is a mechanism that Oppositions down the ages have used; it has been well used during our debates in Committee of the whole House and, indeed, I suspect that I may well have tabled such amendments in the past as an Opposition Front Bencher. They tend to be tabled and they tend to be rejected. Of course, the Government will
	always keep matters under review, but the proposed amendment does not add very much of great value. The changes that we are setting out to corporation tax are a vital component of the reforms that are essential if we are to achieve our goal of creating the most competitive tax system in the G20, and we have already set out clearly the impact of the changes to capital allowances.
	The right hon. Gentleman raised the question about employment and manufacturing, but the fact is that in the three months to February employment rose by 143,000, while in the first quarter of this year manufacturing grew by 1.1%, and in Q4 of 2010 the net rate of return of manufacturing companies rose to 10.4%, up from 8.6% in Q3.
	We are taking steps to support manufacturing and to make the UK more competitive with a stronger tax system. I therefore propose that the clause stand part of the Bill and ask the right hon. Gentleman to withdraw his amendment.

Nigel Evans: I call Mr Hanson.

David Hanson: Good afternoon, Mr Evans. Can I welcome you to the Chair of this seemingly unending Committee, which has been going on for the past couple of days?
	I have listened very carefully to the Minister, but I think that the amendment is very modest: we are asking for a report in 18 months’ time, in October 2012, on the impact of the changes. We ask for that, because my right hon. and hon. Friends retain an element of concern that the cut in manufacturing capital allowances will damage some manufacturing sectors. Based on those concerns, we wish to continue to reflect on those matters, and I therefore wish to put the amendment to a Division, so that we can place on the record our concerns about the capital allowance cuts and state that we wish to review the matter very clearly in 18 months’ time, in October 2012.

Question put, That the amendment be made.
	The Committee divided:
	Ayes 121, Noes 249.

Question accordingly negatived.
	Clause 10 ordered to stand part of the Bill.

Clause 35
	 — 
	Reduction in childcare relief for higher earners

Question proposed, That the clause stand part of the Bill.

David Hanson: Once again, Mr Evans, I welcome you and look forward to your time in the Chair as we debate clause 35 of the Finance Bill. You will of course be aware that we tabled an amendment to the clause that you have chosen not to select, which is your prerogative; we are relaxed about that. However, it is important that we test and discuss the issues in the clause with Ministers to examine its impact, as well as the impact of other changes that form part of this package of measures.
	Our concerns centre on the effects of the various changes that have been made to child care support. Clause 35 introduces changes to the higher rate taxpayer relief for child care—an issue that caused some discussion in the last months of the previous Labour Government and will undoubtedly cause further discussion today. We need to look at the clause not only in its own context but in the light of the wider taxation and benefit policies that the Government are progressing. This is part of a number of measures that will address a range of issues to do with child care and families generally. I also want to consider some of the technical matters that outside groups have raised with me and with other hon. Members regarding the wording of the clause and, if I may slightly stray outside the scope of the debate, the wording of schedule 8, which is related to it and to which we will return in Committee in due course.
	The background to clause 35 will be familiar to my right hon. Friend the Member for Edinburgh South West (Mr Darling) because it had its genesis in discussions that took place as part of the previous Labour Government’s proposals. Members will be aware that
	in 2009 my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Prime Minister, announced to the Labour party conference proposals that he brought before the House later that year regarding child care relief and basic rate relief.
	In government, Labour’s plan was to use the savings from limiting child care relief to basic rate relief to fund an expansion of child care places for two-year-olds in England, with potential consequential reliefs and amendments for Wales, Scotland and Northern Ireland. There was some controversy and discussion on those matters. The Exchequer Secretary will be aware that there was extensive discussion in the Labour Government about those matters, and that under the leadership of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, they settled on limiting child care relief to basic rate relief, with the purpose of funding an expansion of child care places for two-year-olds.
	I would like clarification from the Exchequer Secretary today on—[ Interruption. ] Don’t worry, I am still here. The hon. Member for Crewe and Nantwich (Mr Timpson) will know that one picks up the occasional sedentary remark. Unless I reflect back on the last remark, it will not appear in Hansard, and on this occasion, I will not reflect back on it. As can be seen, Government Members have expressed an interest in my speech.
	The Government have made changes to the Labour Government’s proposals on basic rate relief and the expansion of child care places for two-year-olds. Indeed, the Government’s proposals are markedly different on the child care element, to which the relief is linked. The Labour Government had planned some 250,000 child care places for two-year-olds from low-income families, although I accept that that was scaled down to about 65,000 child care places. The Government proposals before the Committee will increase from 10 to 15 the hours for the pilot of child care places for 28,000 children. There is a significant expenditure saving in clause 35, compared with the Labour Government proposals. I think that it is worth focusing on those issues today, because if the scope of the discussion that I have given is accepted, this measure cannot be divorced from the reasons why the Labour Government intended to undertake the purpose of clause 35 and what the current Government are now doing with that resource.
	From January this year, value added tax will cost families with children an extra £450 a year on average. That is one of a range of measures on the table that will press hard on the ability of individuals to provide child care at affordable levels.
	The Government are pressing ahead with the change that my right hon. Friend the Member for Kirkcaldy and Cowdenbeath proposed in government to pay for the trebling of the number of free child care places available to the most deprived two-year-olds. We accept that the relief, which is manifested in clause 35, was badly targeted. That is why we made those changes in government, and our proposal would have paid for more of the poorest in our society to have child care. I want the Exchequer Secretary to explain how the resultant savings from the proposals will be invested to support issues such as child care for people in our community.
	At the same time, the Government are hitting family finances in other ways, such as through child tax credits and through child benefit being frozen, and indeed being cut for many people in the years ahead. The families who will be affected by this measure will soon
	be affected by other measures, particularly that on child benefit. The taxation changes in clause 35 need to be seen in the light of the decision to withdraw child benefit from April 2013 from households containing at least one higher rate taxpayer.

David Gauke: I am following the right hon. Gentleman’s speech closely. Will he clarify for the Committee whether the Labour party has a specific proposal on what the savings from this measure should be used for? Is it committed to using them for nursery places, or for something else?

David Hanson: As I have said, the Labour Government’s original proposal, which was announced by the then Prime Minister, was to use the resources saved from this badly targeted tax relief to support the extension of child care for two-year-olds in poorer families. Our purpose at the time was to expand the number of places to about 250,000. There were discussions in the Government, and the Exchequer Secretary knows that the figure we settled on was about 65,000 child care places. I understand that he proposes to stick to the pilot of 28,000 places, and I would be grateful for clarification on that, and to extend the number of hours to 15 hours per week. That is significantly less than what was proposed by the previous Government.

David Gauke: Does the Labour party remain committed to its proposals in government to use that funding for 65,000 child care places?

David Hanson: Actually, Ministers answer the questions and the Opposition ask them. I have been clear with the Exchequer Secretary about the proposal that we outlined in government, and that will be our view. We are potentially four years from government.
	I am simply pressing the Exchequer Secretary to explain what the impact is of clause 35, and why there has been a significant change—unless he wishes to clarify that further—to the proposals announced by the previous Government on extending child care for two-year-olds. It is important that we know not just what the clause means, because it will restrict child care support for higher rate families. The purpose of our proposal in government was to expand child care arrangements for poorer and lower-income families. The Government are now squeezing the middle while—unless the Exchequer Secretary clarifies that the contrary is the case—not providing the same level of child care places that were originally proposed by the Labour Government.
	This measure is coupled with a range of other measures, which are not before the Committee in clause 35, but which I hope you will give me the scope to touch on, Mr Evans. There are real-terms cuts to child benefit, which is frozen at £75.40 this year for families; the baby element of child tax credits, which is worth £545 a year, has been scrapped; benefits have been set on a permanently lower path of inflation; the basic and 30-hour elements of working tax credit have been frozen; and the second income threshold for the family element of child tax credit has been cut. Those measures all add to the pressures on child care responsibilities and on families.

Andrew Gwynne: My right hon. Friend has set out a series of measures that the Government are implementing in the Budget. Does he find it ironic that those measures
	come from the Conservative party, given that the Prime Minister claimed before the general election that he would lead the most family friendly Government in history? Those measures are penalising hard-working families, and women more than men.

David Hanson: Indeed. It is a fact of life that child care often remains the prime responsibility of the woman. Child benefit is paid to the woman for that purpose. Clause 35 does not deal with child benefit—I do not wish to test your patience, Mr Evans—but, in principle, the purpose of the Labour Government’s original policy proposals was to expand free child care for people who could not afford it otherwise, to help to support women to get back into work and to help individuals to support their children.
	As I understand it—I am willing to be contradicted and to hear clarification from the Minister—the impact of the proposals is that fewer child care places will be available than the previous Labour Government proposed. That must be a matter of some concern. Indeed, in our original amendment, we proposed a review of child care provision to consider the impact of all these measures. Clause 35 proposes changing higher-rate relief to basic-rate relief for higher-rate taxpayers, but we should not consider it in isolation; it is only one change among many on child benefit and the other issues that I have mentioned that raise concern among the official Opposition.
	The Minister will know, because we discussed this in the debate on the last group of amendments, that the OECD has recently released a report that warned that child poverty was set to rise, thanks to the Government’s policies. I am proud of the fact that one of things that we did was to lift more than 500,000 children out of poverty. Sadly, it looks as though that policy will be reversed. The impact of clause 35 and the Government’s proposals on spending the associated resources represent a different choice from the one that the previous Labour Government intended to make, and the Minister needs to focus on that.
	The Labour Government made progress on tackling child poverty. When we left office, it was expected that about 1 million children would be lifted out of poverty by our actions. The impact of clause 35, as I read it, relates to high earners. I accept that the relief was badly targeted, but I repeat that I want the Minister to clarify how the changes in expenditure that he proposes as a result of clause 35 will impact on child poverty issues.
	The OECD has found that
	“progress in the UK has stalled, and”
	child poverty
	“is now predicted to increase”.
	The measures in clause 35 will not assist the progress that the previous Labour Government made in providing a lift out of child poverty for the poorest families in society. At a stroke, unless the Minister contradicts me, by not using the expenditure as originally planned by the previous Government, he will be removing the ability to invest in the child care places that were planned for the poorest members of our society.

Geoffrey Robinson: My right hon. Friend touches on the great steps made under the previous Government to alleviate child poverty.
	Was he by any chance present during Prime Minister’s Question Time today, when the Prime Minister made it clear that we had reached the end of the road in terms of taxation measures to achieve that? In particular, he said that he was absolutely against further redistributive measures. The proposals, which are separate from straightforward taxation measures, will take further steps to aggravate, not alleviate, child poverty.

David Hanson: The Minister has an opportunity to clarify the Government’s approach to the provision of child care. That is clearly linked to clause 35, because the Labour Government’s original proposals were designed to meet the objectives that my hon. Friend has indicated. That point is made, and I want the Minister to clarify his approach to child poverty and how the Government propose to fund child care places for two-year-olds.
	Agencies and organisations outside the House have made a range of comments on clause 35. It is worth giving the Minister an opportunity to respond to them, and I hope that he will offer some reassurance. Some of the comments also relate to the accompanying schedule. I appreciate that the Committee is not considering that now, but it is very much linked to the clause.
	The Low Incomes Tax Reform Group, which, as the Minister will know, is an initiative of the Chartered Institute of Taxation, has raised with me some real concerns about clause 35 and schedule 8. It is concerned about the complex interactions of tax-free vouchers with tax credits and child care cost support, the dynamics of which it believes changed again after 6 April 2011. It is important that the Minister responds to its concern about the poor channels of advice for employees and employers about the implementation of the scheme proposed under clause 35.
	The group believes that there may have been errors—under the previous Government, I admit—in HMRC’s online calculator, and it is concerned about how the implementation of these measures will be taken forward. It is particularly concerned that although the system is designed for fairness, the results that it produces may not be fair. I shall give some examples, if I may, of its concerns about clause 35.
	The group is particularly concerned that the clause will remain reliant on interpretation according to guidance published in draft on HMRC’s website, which it believes is inconsistent with the clause. I am not making any assessment of the group’s judgment call on that matter, I am simply placing it on the table because this Committee debate gives the Exchequer Secretary the opportunity to examine whether that concern is justified. He may be able to provide some comfort by giving his interpretation.
	The group has raised the concern that under schedule 8 —the schedule will be discussed in the Public Bill Committee, but it is worth mentioning now—the changes will apply only to those whose employer estimates them to be higher rate or additional rate taxpayers at a particular point in time, rather than to those who are actually found to be so by a final assessment. It is important that either now or when we discuss schedule 8 in the Public Bill Committee, the Exchequer Secretary reflects upon that concern and provides some clarity about when the assessment will be made on whether individuals are higher rate or additional rate taxpayers.
	We need to know at what stage in the financial year that assessment will be made, who will make it, how much of a burden it will be on employers and employees and whether the figures and facts that HMRC will use in the calculation are sound and to his satisfaction. They must be seen to be just and fair.
	The Low Incomes Tax Reform Group has expressed concern that the change may have equality impacts, for example on employees who become long-term sick or disabled, on women or on those who switch to part-time work in the course of the year. It suggests that there should be some flexibility in the interpretation of clause 35 and schedule 8.
	The Library has calculated that overall, families will be some £1,700 a year worse off due to the Government’s tax and benefit changes, of which clause 35 is one. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, the Prime Minister promised to lead the most family-friendly Government ever, and I should like to hear from the Exchequer Secretary where the proposal, when linked to the proposals on child benefit and the working tax credit and the others that we know about, fits into the Government’s overall strategy for child care.
	We accept that there will have to be difficult and challenging decisions, and I reconfirm that the previous Labour Government wished the targeting now set out in clause 35 to progress.

Grahame Morris: Is there not also an issue to consider about clause 35 breaking the principle of universality—the idea that benefits apply irrespective of income?

David Hanson: There is, and my hon. Friend will know that we have been very clear that the Government’s wider proposed changes to child benefit are not fair or equitable, and that child benefit should remain universal. The former Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, and the former Chancellor, my right hon. Friend the Member for Edinburgh South West, decided that child care was poorly targeted, but that if universality was to be broken, we must provide help and support to the poorest families to ensure that they had child care for two-year-olds. The Labour Government planned some 65,000 to 68,000 child care places as a result of the measures that are now in clause 35. The current Government have accepted those measures in principle, as we did, but unless the Exchequer Secretary tells me otherwise I do not believe they are delivering the outputs that we planned as a benefit of saving resources.

John Cryer: We know that whenever means-testing is put in place, there is a cost because of the bureaucracy that is needed to administer it. Does my right hon. Friend have any idea how much this particular method of means-testing will cost?

David Hanson: My hon. Friend raises an interesting point. That is another issue that we wish to explore not just today, but when we debate schedule 8 upstairs in Committee at a later date. The element of complexity and randomness in the application of the clause has been raised with me by the Low Incomes Tax Reform Group. It is incumbent on the Exchequer Secretary to answer those criticisms before we consent to the clause.
	There are choices to be made in tackling the deficit and we must look at the options. The then Labour Government made the same choice, but would have ensured that more child care places were available.

Andrew Gwynne: My right hon. Friend makes his case on clause 35 and says that the previous Labour Government considered the possibility of targeting. However, they did so in the context of a wider range of measures available to families to support them in the upbringing of children. Does he share my dismay that clause 35 is being introduced against a backdrop of absolutely clobbering families hard and removing benefits that have made a huge difference to them in my constituency, and no doubt in his?

David Hanson: If I may, Mr Evans, I shall try to touch briefly on the wider policies to which my hon. Friend refers. I am conscious that clause 35 is specific to higher-rate tax relief—

Nigel Evans: Order. I am delighted that Members mention clause 35 from time to time, but it is really quite specific. This is not a general debate on child care or indeed on other policies. Perhaps we could focus more on the provisions contained in clause 35.

David Hanson: We have known each other since our elections to the House on 9 April 1992, Mr Evans, and as ever, I shall try to keep to your strictures as the good Chairman that you are. You will note that amendment 8, which you did not select, would have prompted a wide-ranging discussion on the impact on child care. I am trying to focus on clause 35 and not to stray into amendment 8 or the issues that my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) touched on. However, those issues are important when we are looking at the impact of clause 35 on a particular group of people, because that same group of people will lose child benefit and a range of other child care support measures because of their income, and that will shatter the principle of universality that my hon. Friend the Member for Easington (Grahame M. Morris) mentioned.
	The Opposition will listen to the debate on clause 35, but we might oppose it. However, there are important points to be examined and answered in detail today. First, how do we use the resource? Secondly, how do we implement the policy? Thirdly, will the Minister answer the challenges made by external bodies about the operation of the clause in practice?

Grahame Morris: As my right hon. Friend the Member for Delyn (Mr Hanson) has already indicated, clause 35 introduces schedule 8, which contains the provisions for reducing child care relief for higher earners. My understanding is that the latter measure will be dealt with at a later stage upstairs in Committee.
	As has been indicated, Labour considered proposing a similar change, but at its heart, it was trebling the number of free child care places available for the most deprived two-year-olds. That is the problem with the Government’s measure. The Labour party considered better ways of targeting support for child care to support both child care and the family throughout its time in government, but it seems that the coalition is taking
	money away from families completely, without retargeting it at those who are most in need. There is a basic contradiction between Labour’s position and that of the coalition Government. Indeed, the Government’s policies across the board seem to be an attack on families, and other groups in our society. Under their policies, middle-income and working-class families are hit harder than those at the top of society, and their policies do not redirect money into better-targeted child care.

Geoffrey Robinson: Rather than a redirection of money, is this not simply camouflage for a straightforward cut? It is a breach in the universality principle that strikes at the very foundations that hold the nation together.

Grahame Morris: My hon. Friend has hit the nail on the head: there is a fundamental point of principle here. I suspect that there is much more in the clause than is apparent that breaks this principle of universality. The debate on clause 35 concerns not only the immediate measure of removing child care tax relief from higher earners, but the course that the Chancellor is charting against families and the welfare state. On child care tax relief, it is worth remembering that it was John Major, when he was Chancellor in 1990, who first introduced relief for employer-supported child care, and as has been pointed out, that was extended by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor. It is right that Labour considered changes to this relief in order to better focus Government support on child care.
	The last Labour Government considered tax rate reliefs of this kind. Hon. Members have referred to expert bodies. However, the tax faculty of the Institute of Chartered Accountants argued that it would
	“be burdensome, disproportionate and open to manipulation and abuse”,
	so it ruled out this tactic of preventing benefit from being paid to higher earners or excluding them from the system. As I mentioned earlier, the real danger of the Chancellor and coalition Government’s tax and benefit policies is that they could push middle Britain out of the welfare state. It is a squeeze on middle England. Taken with the decision to end child tax credits and child benefit for families with a single high-band earner from 2013, it seems to me and Opposition colleagues to be a concerted attack on the fabric of the universality of the welfare state.
	In the light of the rhetoric that surrounded the measure, and given that it appeared that the Government were intent on making immediate cuts, it came as a surprise to me and other Opposition Members that when it was announced, it was delayed until as late as 2013. That was a surprise because it seemed to be an attack on a core vote area of the Conservative party—perhaps it is no longer such a core vote area. It was a further surprise that a party that in opposition had consistently called for tax cuts for married couples seemed in government to want to attack them as soon as they had children. At the time—I believe it remains the case today—there was considerable concern that this policy was ill-thought-out, and that it was a party political stunt from a Conservative party and a coalition Government still finding their feet.

John Cryer: Does my hon. Friend agree—this is in line with the intervention from my hon. Friend the Member for Coventry North West (Mr Robinson)—that this badly thought out measure is an attack on the collective ethos of society, which is always dangerous?

Grahame Morris: I am grateful for that point. Others have made it, and I have tried to echo its sentiments. The Government have the opportunity to rethink the implications of this decision, because implementation is not until 2013, so I hope that the Minister will address that point at the close of the debate. I am sure that hon. Members will recall that when the measure was proposed, Labour was engaged in a leadership election. Perhaps it was an attempt to steal the headlines.
	However, from representations that I have received from expert groups, individuals and constituents—I am sure that other Members have received similar representations—it seems that the policy has been shown to be ill thought out. Whatever one’s views about middle England—whether it exists, whether it should be protected —it is crystal clear that the policy will disproportionately affect families with a single high earner. As someone who considers himself a socialist and something of a champion of the working classes and those at the lower end of the income spectrum, I think that there is a basic issue in this debate about justice and fairness. For families with a single high earner and perhaps no second earner, there is a clear injustice and anomaly when compared with a family with two high earners, as both families would lose the same amount.

Julie Hilling: I wonder whether my hon. Friend has come across people in his constituency, as I have in mine, who are talking about giving up work—contrary to the belief shared on both sides of the Committee that work should pay and that the best thing for families is for parents to be in work—because of the effect of everything that is happening, including losing child care and the other benefits that higher earners receive. Does he share my view that that is clearly not the best thing for families or our society when we are trying to grow our economy again?

Grahame Morris: I am grateful to my hon. Friend: that is a good point well made. There are a number of levels where the Government now have an opportunity to stop, reflect and listen to representations—to steal a phrase from the Health Secretary—about the impact of the policy on the economy. I am sure that that impact was never intended, but it should certainly be taken into account if people now have a perverse incentive not to engage actively in earning a living and making a contribution to society.
	Child benefit is a key part of the welfare state, and one that applies the principle of universality to all families in recognition of society’s duty to support not just families, but future generations. I had always assumed that that was a cross-party commitment, irrespective of party political allegiance. However, by taking away £1,000 in child benefit and child tax credits from families earning just over £40,000, the coalition Government are damaging our system of welfare for the future. We know—or at least we suspect—that the measure is more to do with trying to undermine the strong support of
	middle England and the middle classes for the welfare state. We on the Opposition Benches suspect that the purpose of the measure is to move British politics in a new direction. My concern is that an Americanised system of low taxation with a basic safety net to catch those at the very bottom would be a move in the wrong direction.

Nigel Evans: Order. This is becoming more of a general debate about the welfare state, which is clearly not what is dealt with in clause 35, which is actually quite specific. I have given a lot of latitude up to now, but we must now focus on clause 35.

Grahame Morris: Thank you, Mr Evans. I shall try to ensure that we focus on the clause.
	Let me quote some figures from the House of Commons Library that give some detail on the implications of the clause. The Library has calculated that some families will be £1,700 a year worse off owing to the Government’s proposed tax and benefit changes. The Chartered Institute of Taxation has warned of the
	“considerable increase in the effective tax burden of those on incomes in the £40,000 to 50,000 bracket”,
	which the clause deals with. The Chartered Institute of Taxation also said that
	“increasing the tax burden on middle-income households while withdrawing tax credits and child benefit from them will result in their being squeezed proportionately more than those on higher incomes”.
	In addition to families on more than £40,000 a year losing benefits, as set out in the clause, families will lose £450 a year on average because of the VAT increase. Added to that, child benefit has been frozen for three years, which equates to a real-terms cut of more than £75 this year for a family with three children, and the baby element of the child tax credit, which is worth £545 a year, has been scrapped. Added together, that all amounts to a quite astonishing attack.
	The Chancellor’s answer to cutting the deficit has been to shrink growth and cut support for families and the most vulnerable. In my constituency, take-home pay is almost 20% lower than the national average. Young men and women have struggled to raise families in my area, which has been blighted by unemployment for more than three decades. The previous Government not only provided greater financial support for those struggling families; they also invested in schools and communities, and tried to revitalise and diversify the economy and create new jobs. The programme offered by this Government, and particularly the provisions in clause 35, will turn the clock back to the 1980s, not only for Easington and large parts of County Durham and the north-east but for many of the great cities in the north and for many people who aspire to raise themselves up and to progress.
	My contention is that the clause breaks with the principle of universality and that that is likely to be followed up with tax cuts as a pre-election sweetener. In that way, the Government are beginning the process of undermining our welfare state, which they appear to have opposed in one form or another since its foundation 60 years ago. The last Labour Government significantly increased income-related support for families through tax credits, and they also systematically increased child
	benefit and maintained their commitment to progressive universalism. The Chancellor has frozen child benefit for three years, ditched progressive universalism and hiked up VAT—

Nigel Evans: Order. The hon. Gentleman is now going much wider than clause 35. Does he wish to resume?

Grahame Morris: Yes, I will try to bring my remarks back to the clause.
	I am fully aware that the amendment that was tabled in the name of my hon. Friends on the Front Bench was not selected—[ Interruption. ] We shall not be able to talk about it in the debate. Getting back to clause 35, we would require the Government to look at how their policies of tax and spend are affecting families right across Britain—

Tim Loughton: Have you read the clause?

Diane Abbott: Will my hon. Friend give way?

Grahame Morris: I will happily give way to my hon. Friend.

Diane Abbott: Does my hon. Friend agree that all Labour Members have read the clause and that it is precisely because we have read it that we are so opposed to it? It is also important, in giving our opposition its full flavour, that we put it in context.

Grahame Morris: I am grateful for that intervention. My hon. Friend makes a reasonable point. All that we are trying to do is give the Government a chance to reflect on a bad decision that has been made in haste, and to look at the impact that these measures will have on families. That is not a revolutionary approach. It seems quite reasonable to me. The Government will have ample opportunity to reflect on these matters, because the provisions will not be implemented until 2013. Were they to do so, I hope that that would provide the impetus for a wide-ranging debate on whether the coalition will push ahead with its policy on child benefit and child tax credits, and on what the implications of that will be for families, for the broader economy and for society.

Geoffrey Robinson: I am conscious of your strictures, Mr Evans, and I am in no way challenging the Chair, but I understand the difficulty that my hon. Friend is having in considering clause 35 on its own. It can be considered only in the wider context of the other measures that together amount to an attack on families by a Government who said that they were going to be the most green-friendly Government ever—never mind the most friendly Government ever. It is the cumulative effect of all those measures that makes those claims so vainglorious and empty. That illustrates the difficulty that my hon. Friend is having, and that I would have if I were to contribute to the debate, although I would try to be a little stricter if I could. We cannot isolate the clause from the whole package of proposals that will compound the effect of this one.

Nigel Evans: I thank the hon. Member for his advice, which I am not going to take. We are talking very narrowly about clause 35.

Grahame Morris: I am sure you will be pleased to hear, Mr Evans, that I shall conclude my remarks in a few moments.

David Hanson: Does my hon. Friend accept that the original proposals of the previous Labour Government to increase the number of child care places for two-year-olds in the poorest areas would have benefited Easington, County Durham and many other poor areas in the north of England, as it would have benefited similar parts of constituencies elsewhere? That is why we are focusing on the impact of clause 35 not just on tax relief for higher earners but in respect of what could have been done with the spending.

Grahame Morris: I am glad that my right hon. Friend has taken the opportunity to place that excellent point on the record.
	I hope that the Government will take the opportunity to take a breath and reflect further on clause 35 rather than digging into the position announced last October, as the provisions will not be implemented until two years from now. Why does the Chancellor not agree to look again at the effect of his taxation policies? He has an opportunity to do so before 2013. He needs to reflect on the impact of the removal of child care tax relief, child benefit and child tax credits, which, taken together, mark an attack not just on families but on the welfare state as a whole.

Nigel Evans: I now have to announce the result of the deferred Division on the Budget report and the UK’s convergence programme. The Ayes were 249 and the Noes were 139, so the Ayes have it.
	[The Division list is published at the end of today’s  debates .]

Andrew Gwynne: It was not my intention to speak in the clause 35 stand part debate. Having listened to my right hon. Friend the Member for Delyn (Mr Hanson) and my hon. Friend the Member for Easington (Grahame M. Morris), however, I have decided that it is important for me to do so.
	As has already been said, the clause introduces schedule 8, which introduces changes to the higher rate taxpayer relief for child care. That was first announced by the Government and, as my right hon. Friend the shadow Minister said, Labour does not oppose it, except for the important point—I bear in mind your earlier strictures on not extending the debate too widely, Mr Evans—that the measure has a wider impact on the Government’s child care policy and how it fits in with the Budget measures.
	I have some sympathy with the notion of expanding child care places for two-year-olds. The previous Labour Government made greater provision for early years education, which has been incredibly beneficial to those children. I declare an interest in that all three of my
	children went through early years education under a Labour Government and, thanks to that Government’s investment, they are doing brilliantly at primary and secondary school.

Diane Abbott: Would my hon. Friend care to share with the Committee the name of the primary school?

Andrew Gwynne: I am happy to say that all three of my children went to St Anne’s primary school in Denton, where my wife, who is up for election tomorrow, is a chair of the governors. My eldest son goes to Audenshaw high school, which is also in my constituency, and all my children are getting a first-class education in those schools.
	Let me return to clause 35, Mr Evans, for fear of being told off by your good self for straying too wide of the issue. The issue, for Labour Members, is this. We support the extra investment in child care for two-year-olds, especially in constituencies such as mine. Denton and Reddish is quite a deprived constituency, which covers five wards in the Tameside metropolitan borough—which is, I believe, the 52nd most deprived local authority in England—and the two Reddish wards in Stockport, which, although Stockport itself is a much more prosperous borough, are the two most deprived wards in the constituency. Investment in early years education has made a big difference to young people in constituencies such as Denton and Reddish. I would particularly welcome extra investment in nursery education in those deprived communities and, indeed, the Labour party proposed to provide it. I am pleased that the present Government are pressing ahead with a change that we proposed when we were in government.
	Where we differ is in our approach to targeting. My hon. Friend the Member for Easington made a valid point about that. Although I understand the arguments for targeting as a way of ensuring that communities such as his and mine receive the benefit of extra early years provision, some constituents who are better off than the average in my constituency tell me—and it is difficult to argue against what they say—that they pay considerably higher taxes and pay into a welfare state system, and that they expect to get at least something in return. Those payments are their buy-in to the universal welfare system. I take on board your strictures, Mr Evans, but I also take on board the points made by my hon. Friend.

John Cryer: What concerns me about the changes is their incoherent nature. It appears that there have been knee-jerk reactions to save a bit of money here and a bit of money there. I fear that the Tory party may be moving from being, as Disraeli said, the party of organised hypocrisy to being the party of disorganised hypocrisy. For the benefit of Government Members, incidentally, Disraeli was a Prime Minister, and a Tory Prime Minister.

Andrew Gwynne: I entirely understand what my hon. Friend has said. There is a real inconsistency in the Government’s approach. While I think it commendable to raise additional money to target early years provision, particularly in constituencies such as mine, I also think that the Government’s so-called family-friendly approach
	is deeply questionable. As I said earlier in an intervention, when the Prime Minister was Leader of the Opposition he made it clear that he would be proud to lead the most family-friendly Government in history. Whether the Government are family-friendly is, of course, a matter for debate and conjecture. I can only say that the constituents who regularly come to my advice bureau seem to have been clobbered time and again by the changes that the Government are implementing, many of which—

The First Deputy Chairman: Order. The hon. Gentleman is much too wide of the mark again. If he cares to look at page 21 of the Bill, he will see that clause 35 is only 11 words long and is drafted quite precisely. Will he now please focus on the clause?

Andrew Gwynne: I will do so, Mr Evans, and I take your point precisely.

Geoffrey Robinson: We are not opposing the 11 words per se. [Interruption.] We are not going to vote on them, to my knowledge. The point is that the expansion of child care for two-year-olds is not funded, and that is what the whole of our modification to the existing legislation was intended to do. Does my hon. Friend agree that that is the problem with this legislation?

Andrew Gwynne: Absolutely. The funding of these measures needs to fit within the wider context, as set out perfectly eloquently by my right hon. Friend the Member for Delyn (Mr Hanson). He was given a certain degree of leeway by the Chairman to put all this in the context of the wider changes that this Government have introduced on family policy.
	Clause 35 goes some way towards dealing with the issues raised about tackling child poverty. The clause intends to ensure that extra resource is released for early years provision, and we support that. As I said, we proposed to do that when we were in government and, as my right hon. Friend mentioned, it highlights the real progress that was made on tackling child poverty during the Labour years, as was highlighted in the OECD report. I do not know whether the clause will have any impact on the Government’s ambitions to tackle child poverty, because that remains to be seen, but some of these changes could well start to have an impact. The explanatory notes state:
	“Approximately 450,000 parents currently qualify for the relief.”
	I am sure that the Treasury stands by that figure, as it produced the explanatory notes. Those 450,000 people will be concerned by these changes and the Government will have to answer the question that they will be asking: what do they get out of the system? If they are to miss out on this relief as a result of the Government’s changes and the extra child care places are targeted, the Government will have to deal with the points that my hon. Friend the Member for Easington was answering on the general principle of universality.
	Having said that, it is important that this Government maintain a commitment to early years education. There is a degree of consensus across the House on the benefits of ensuring that children can start their education as young as possible, whether or not that is education through play in the context of early years provision—I think that we probably all agree on that. I note that the
	Under-Secretary of State for Education, the hon. Member for East Worthing and Shoreham (Tim Loughton), who has responsibility for children, is in his place. During the last general election campaign he visited a Sure Start centre in Horton Green, in my constituency, with the Conservative candidate. He also had his photograph taken outside my house as part of that campaign, and I was pleased that the then Opposition had visited a Sure Start children’s centre in my constituency. That underlined the background motive of the clause, which is to ensure that more resource is put into the early years.
	However, as my right hon. Friend the Member for Delyn made clear, people have concerns that this Government are not family-friendly, because what they are giving with one hand, they are taking with another. Many of the measures that they have introduced in this Budget, of which clause 35 is part, are deeply damaging to families.

David Hanson: As I mentioned in my speech—it is further confirmed by the Institute of Chartered Accountants in England and Wales—the provision in clause 35 is based on an estimate of whether the employer will have earnings that exceed the higher rate limit on a particular payday. That causes some difficulties with fairness because there will be people who work part time, who change circumstances or who are on maternity leave for part of the year and the implementation of this is as potentially worrying as the policy—

Nigel Evans: Order. The shadow Minister is talking about the schedule, which, as he knows, will be discussed in the Public Bill Committee.

Andrew Gwynne: Having heard your ruling, Mr Evans, I would not wish to stray on to the issue of the schedule. Suffice it to say that HMRC is often very good at making a complicated system far worse, as we have seen in the past with tax credits. That is straying quite wide of clause 35, however.
	Let me bring my comments to a close. The Government’s intentions are good—they want to invest more in early years—but I think they are going about it in the wrong way. Their wider family-oriented policies are deeply flawed and clause 35 fails the fairness test. We need the Government seriously to rethink the range of family policies that they have introduced in the Budget, of which clause 35 plays an important part.

Diane Abbott: I am grateful to have the opportunity to say why clause 35 should not stand part of the Bill. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the fundamental problem with the clause, which in principle at least the outgoing Labour Government were going to promote, is that in its new guise it fails the fairness test. As we go into election season tomorrow and tomorrow night, the fairness of what the Government are doing will be foremost in our electorate’s mind.
	Clause 35 deals with higher rate taxpayer relief for child care. In Hackney, I represent one of the most deprived areas of the country but I do have some higher rate taxpayers. It being Hackney, my higher rate taxpayers are people of discernment and intelligence and they are
	Labour-voting higher rate taxpayers, but none the less my concern overall is for the most deprived in our community.
	When clause 35 is stripped of any pretence of helping low-income families with child care, it is astonishing to see that this Government should so nakedly seek to attack many of their supporters. It is unthinking, chaotic and disorganised and it is not even politically coherent. When we put it in the context, as my right hon. Friend the Member for Delyn (Mr Hanson) sought to do, of the other changes in taxes and benefits that will affect middle England—the cuts in the amount that parents can claim for child care, the freezes to child benefit, the changes to the baby element of child tax credit, the freezing of the basic 30-hour element of working tax credit, the changes to the second income threshold for the family element of child tax credits or the withdrawal rates for tax credits—we see a frontal financial assault on middle England, the very people who the Government will look to for support not just in the local elections in 24 hours’ time but as they move forward.
	Why are the Government seeking to attack middle England in such a way? Is it because we have a Cabinet of millionaires? Do they not understand what it is to struggle to make ends meet, even on a relatively middling salary in a relatively middling condition of life? Is it ignorance or uncaringness about how the majority of people live? Who knows: there can be no question but that as the totality of the changes to taxes and benefits as well as the job losses in the public sector come to the attention of middle England, it will be hard for those people to understand or believe that the Government have their interests at heart.
	Another significant consideration about clause 35 and the suite of changes to child care, family tax and welfare issues is the effect they will have on women. One reason why issues such as tax relief on child care and particularly child benefit remain so emotive in public discourse is that they go back to the original child benefit which some Members might remember was paid to the mother, who had her own child benefit book. For many mothers, that was the only money of their own that they had—that was certainly the case in my family. Even though those payments are now paid through the tax system and to the family as a whole, these are still emotive issues in ordinary families who remember the old child benefit system and remember that the money went to mothers. The reason why it went to mothers was that it was always understood that child benefit was an effective benefit because mothers spent it on their children.
	With a Cabinet of millionaires, the Government do not understand how middle England is struggling. They do not understand how people in middle England fear for the future even if, on paper, they have good salaries and good jobs. They do not understand the emotive content of issues such as child benefit and child tax credit to ordinary women in ordinary families. Ordinary women are looking at the totality of the changes that the Government are making and asking, “Do they really understand my life? Do they really understand what it is to pay bills at the end of the month or to juggle a job and child care and to support the rest of my family?” When one looks at clause 35, presented naked, without the commitment that we had to help lower-paid families with child care, the answer seems to be that, no,
	they do not understand. The Cabinet of millionaires does not know what it is to be in the middle and to feel as though you are just one wage packet away from a really difficult situation.
	In the past decade, middle England has been encouraged to over-leverage itself and been facilitated in doing so, and people are now trying to down-leverage by paying off more of their credit cards and trying to bring down their burden of debt. The Government may say that the £1,000 that people will lose because of changes to this tax relief is only a small amount, but for someone who is juggling their salary to pay off debt, worrying about paying their children’s tuition fees as they go through university and also worrying about how to pay for the care of elderly family members, that money will make the difference between their sums adding up or not adding up at the end of the month.
	The Government’s lack of understanding of the reality of life for many ordinary British people, even those who are, on paper, so much better off today, such as some of my constituents in Hackney, shines through in the clause and in the thoughtless and heedless way in which the Government have brought the measures forward. They have not sought to balance them with measures that might help the poorest, although that might have helped middle England to understand why the changes are being made. Currently, given the way in which the measures are being introduced, all that middle England can understand is that the Government do not understand what a struggle it is for middle-income families, and even some families in which the sole wage earner is a higher rate taxpayer, to make ends meet. Of course, similar proposals were originally brought forward by Labour, but in a very different context. Clause 35 has been brought forward in the context of a series of other measures that will also have an impact.

Geoffrey Robinson: Not only were the Labour proposals brought forward in a different context, but the Labour Government were going to use the money to extend child care for two-year-olds in the least well-off families. Is not that the whole point? Is it not strange that the Government, who are so concerned about cost-effectiveness and getting the most out of every penny they spend, do not realise that all the studies show that the earlier an intervention is made the more effective it is? By not doing what the Labour Government wanted to do and extending that child care to two-year-olds, they are denying themselves the very basis on which they could have realised that principle.

Diane Abbott: That is an important intervention. This is a Government who know the price of everything and the value of nothing. Had they been willing to continue both halves of our policy—taking away tax relief for higher-income taxpayers and extending child care to two-year-olds for low-income families—in the long run, they would realise a cash benefit. I know from my own constituency that the earlier we can make an impact on people, the earlier we can give families support with properly funded child care, the sooner we can save the state money on education and a range of social issues. As I said, these are people who know the price of everything and the value of nothing.
	Clause 35 is the shell of something that the outgoing Labour Government introduced, but it lacks the counterbalancing measures that we were going to introduce. It reflects a Government who do not understand that families are struggling in the current climate, and who do not understand the significance of those tax and welfare arrangements for women. They will pay a price for that lack of understanding in the local elections tomorrow, as middle England looks on the Conservative-led coalition and says, not that this is the most family-friendly Government ever but that this is the most middle-income-family-hostile Conservative-led Government ever.

Kate Green: I am pleased to speak in this stand part debate. I, too, want to express concerns about the proposals on child care, particularly the intention to change taxation.
	It is not the change to taxation in relation to child care with which I wish to take issue but the broader context of funding and provision for child care, and the lost opportunity that the clause represents. Opposition Members accept that in straitened financial circumstances it is appropriate to look at the taxation system and tax breaks for higher earners and better-off families, and that it may be appropriate to rebalance the tax take and those tax breaks. However, we believe very strongly that there are better ways to redistribute—a word that is perhaps more popular among Opposition Members than Government Members—that money for the benefit of families and children and, in relation to clause 35, to achieve adequate child care provision.

Geoffrey Robinson: Did my hon. Friend attend Prime Minister’s questions, given that she said that “redistribute” was a word heard more often among Opposition Members, and redistribution is perhaps a policy more often pursued by the Opposition? The Prime Minister ruled out redistribution almost unilaterally as a means by which we could help—

Nigel Evans: Order. I listened to the Prime Minister at PMQs, and I did not hear him refer once to clause 35. This is rather specific. I know that the hon. Member for Stretford and Urmston (Kate Green) wants to talk about the broader generalities, but that is not what clause 35 is about; otherwise the debate would be very general indeed.

Kate Green: I am grateful, Mr Evans. I am mindful of the provisions in clause 35, which is specifically about taxation and tax breaks for child care. This is about redistribution, and I will say in passing—just one sentence, I promise—that I am proud of Labour’s record on redistribution. We do not talk about it as loudly and proudly as we should in my view, but a set of redistributive policies since 1997 took 600,000 children out of poverty.
	To return to the meat of the clause, I am proud of the way in which we redistributed spending in favour of families and children, particularly the spending that we directed towards building significantly increased child care provision. That is a significant creation of child care provision. It is not perfect, as a number of families are still not provided for, but by any measure it was a step change in provision and a fundamental change in the child care landscape which resulted from Labour policies over the past 13 years.
	This is not a matter of contention across the House. We are all proud of Sure Start. Across the House I see hon. Members welcoming the Sure Start facilities in their local community, filled with admiration for the way they can support young parents and families, and filled with admiration for the way they can be a hub of children’s and family services in the community. It is common ground across the House that Sure Start has been an incredibly valued addition to the landscape of support for families with children. That has assisted and will continue to assist, I hope, with so many of the Government’s goals in relation to social mobility, improving attainment, raising aspiration and so on—a point to which I hope to return in the course of my remarks.
	I am also extremely proud of the free nursery provision that we introduced for three and four-year-olds, and pleased that the Government are extending that to two-year-olds. I certainly welcome that extension, but I have not been able to find very much else to welcome in the Government’s investment in child care. That is why I say that clause 35 is a lost opportunity. It would have allowed more funding to be directed to child care provision and to extending child care provision. It is a regret and a shame that that is not happening. As a result, the challenges that we continue to face in providing good quality affordable and accessible child care to all parents and their children who want it have, regrettably, not been met.

Diane Abbott: Does my hon. Friend agree that the failure to grasp the opportunity to redistribute income in favour of child care for some of our more poorly paid families is the more surprising, given that the Tory-led coalition allegedly believes in the big society? What more important anchor of the big society is there than high-quality child care?

Kate Green: My hon. Friend is right. She highlights another of the Government’s key strategic objectives, an objective that commands great support and interest across the House, but the Government fail to put in the infrastructure and the investment that would enable them to deliver such an objective. Again, that is a matter of regret.
	Any parent will say that child care remains an enormous challenge for families, particularly in terms of helping parents to access the labour market, but much more broadly than that. We know that UK parents already pay the highest child care charges of any parents in the OECD. That is probably why in the OECD report just last week on progress on child poverty across the OECD nations, it was specifically identified—

Nigel Evans: Order. This is turning into a general debate on child poverty and that is not what clause 35 is about. It is about higher earners. I am sure the hon. Lady has read the clause. Will she speak just to clause 35, please?

Kate Green: I beg your pardon. This was not intended to be a general discourse on child poverty. There was a specific reference in the OECD report to the importance of child care, and it is specifically that element of the report that I feel is relevant to the clause, but I entirely
	accept that we are discussing the implications particularly of the provision to remove the tax break for higher earners. My point is what do we do with that money. That must be a financial consideration too.

Geoffrey Robinson: Does my hon. Friend agree that a big opportunity is missed to extend more widely the provision of child care for two-year-olds? That is directly relevant to clause 35. In my constituency, for example, there are two child centres that already have facilities in place for that extension, which cannot be funded because the Government have decided not to pursue the policy that we had in mind. That could have been the basis for using those facilities, which now lie idle.

Kate Green: Indeed, and that does not make good fiscal sense. It cannot be sensible for public money to be invested but then not exploited for the benefit of the community, those families and, indeed, the economy. In the context of this Finance Bill debate, that surely has to be at the heart of our scrutiny of its clauses.
	It is also important that we understand just how much is going on to make it even more challenging for parents to afford child care, and therefore why it was all the more important to use the funding that the tax break before us is saving in order to replace some of the funding that is being lost for the provision of child care.

Nigel Evans: Order. Just to inform the House, I am not going to allow a general debate, either, about what the money could have been spent on. We are talking about the merits, just simply, of clause 35.

Kate Green: I am grateful.
	What is important about the legislation behind clause 35 is that it retained all parents, higher-income parents as well as lower-income parents, in a single integrated child care market. It ensured that all parents received some financial support that helped to create, expand and ensure the quality of that market.
	When lots of families participate in a child care market, the market is sustained, secure and improved in terms of what it can offer to families, and that is important for raising the aspirations of families and children, a particularly important strand of the Government’s social mobility strategy. If we are to remove higher-income families from the ambit of the child care market, and Opposition Members all understand why the Government might choose to do so, it is very important indeed that we recognise the potentially deleterious effects on the quality of the child care market for those families who remain within it—those families whom we want to remain within it because of the improvements that it can secure for children’s outcomes. Importantly, therefore, when removing that tax advantage we must be very careful to ensure that we compensate for any damaging effects that its removal might have on the general landscape of child care provision, including its quality and its availability for other families who remain within its ambit.
	This is very much a debate in the context of a Finance Bill. It is therefore a debate about what works most effectively for the economic strength of the country, and it is very much a debate about how best we come through the recovery and start to promote the return of
	the growth that we all hope to see. We have just begun to see it return hesitantly and slowly, but we now want to see it improve.

Diane Abbott: My hon. Friend touches on the fact that this is a debate about clause 35 of the Finance Bill, but it is also about how we as a society get through the current financial crisis. Does she agree that one way we will get through the current financial crisis is by something that clause 35 undermines: social cohesion and the principle of universality? To have the clause without the counter-balancing arrangements of child care for two-year-olds and the lower paid is to undermine the process of social cohesion, which is the only way we will get through the current financial crisis.

Kate Green: My hon. Friend leads us into really important territory: the issue of universal provision. If we are going to start to eat into that universal approach, for good reasons, we have to be very mindful of and careful about the consequences, so my hon. Friend is right to highlight the consequences for social cohesion, which is a key fundamental of good economic growth.
	We are not going to do well as a national economy if we have to compensate all the time for a fractured society, a society of strains and tensions, in which the public pick up the cost all the time in order to remedy the damage that that causes. My hon. Friend is therefore absolutely right to point out that undermining the universal approach has potentially dangerous consequences for our economic performance down the line—[ Interruption. ] I sense that the Chairman fears that I am straying slightly—

The First Deputy Chairman: Not slightly!

Kate Green: Not slightly—straying from the ambit of clause 35.
	My hon. Friend’s point is correct: fundamentally, the clause removes a universal approach, an approach that keeps everyone in the context of the child care market and the wider social community. That is a really important point.
	It is also important to recognise that we are talking about developing children’s long-term economic potential. I do not like to think of our children as future economic actors—I like to think of them enjoying and making the most of their childhood now—but they are the next generation of providers and sustainers of our economy and community care for us in our old age. Removing this financial support from some families and not placing it in the child care market means that some children will be more likely to lose the advantages that good-quality, professional, formal child care can bring.

Andrew Gwynne: My hon. Friend is adding great expertise to the debate with her background in this area of policy. Although clause 35 was a mechanism that was suggested by the previous Labour Government, is not the difference between our approach and that of the Government that we would have invested the money raised back into child care provision?

The First Deputy Chairman: Order. I am not going to allow any further discussion as to what the money could have been spent on. This debate is simply about clause 35.
	I know that the hon. Lady has expertise in this matter, so I ask her to restrict herself to clause 35, which relates to higher earners’ child care.

Kate Green: I am grateful, Mr Evans. I was mindful of your earlier injunction not to stray into a discussion of what the money be spent on, and I do not intend to do that.

Diane Abbott: Will my hon. Friend give way?

Kate Green: In a moment.
	I should like to talk about what this provision will mean in terms of the number of children likely to access good-quality child care provision in future. The knock-on effect of clause 35 will be that not only the children of the families from whom this tax break has now been removed will be affected, but so too will the increased number of children who will fall out of the ambit of affordable, good-quality child care. I say that not only because of the importance of a universal market that tends to raise quality and aspirations but because starting to chip away at the money that is flowing into this market, which will inevitably happen, means that some parents who are currently able to afford to access the formal child care market will decide not to do so.
	As money starts to be withdrawn from the market, provision generally will start to be reduced, and in turn other parents will find it more difficult to access it, whether or not they have financial support from other measures such as the child care element of the working tax credit to enable them to do so. Then we will be in a downward spiral. By removing funding at the top but not putting it back elsewhere, we start to shrink the child care market, and the more it shrinks the more it continues to shrink. The problem with this market, as we have seen again and again, is the insufficiency and unpredictability of provision, and those elements will be put under further pressure because there will be less money to sustain the market even at the current levels.
	I am conscious that a couple of my hon. Friends wanted to intervene, and I do not want to deprive them of the opportunity to add their comments if they would still like to do so.

Diane Abbott: I have listened with great interest to what my hon. Friend has said about the effect of clause 35 on the child care market, which is very germane to the discussion. We heard from the Chancellor of the Exchequer many months ago that we were all in this together. What message does clause 35 send to people? It says to higher income tax payers that they are not in it with everybody else, and it says the same to the very poorest families with two-year-olds who will not get the improvement in child care that we would have promised them. That is a very divisive, non-communitarian message.

Kate Green: My hon. Friend is right. We are beginning to say that child care is only for some children, not for all children. Yet we know that it is universal, mixed child care settings that produce the best outcomes for the most disadvantaged children. It is key to social mobility and to raising aspiration that children engage with other children in mixed child care and educational settings. The clause will make further inroads into that approach.

David Hanson: Does my hon. Friend agree that the context in which the Labour Government decided to restrict the tax relief on child care for higher earners, as under clause 35, did not include the proposal to freeze and then cut child benefit for higher rate taxpayers? The context is therefore entirely different, even though some of the objectives in clause 35 are similar to those of the previous Government.

Kate Green: My right hon. Friend is right. Family budgets are under pressure, including the family budgets of higher-income families. They are under pressure from the serious and regrettable attack on the universal principle. The means-testing of child benefit at the top will put those families under financial pressure. We know, too, that families are facing higher living costs. We have talked in other debates about the rise in living costs, through VAT, fuel prices, food prices and so on. Families that are suffering the loss of a tax break for their child care costs are also seeing other costs going up.
	Child care costs themselves will continue to rise. I cannot recall one year since the Daycare Trust began its annual survey of child care costs when they came down. It is highly likely that they will continue on an upward trajectory, and on a dramatic upward trajectory in some parts of the country. That is certainly the case in London, as it has been for a number of years.

David Hanson: Is my hon. Friend aware of any consultation that has taken place since the previous Government’s proposals on the restrictions in clause 35? The landscape has changed since the original discussions. Does she think that there should be wider consultation on this matter?

Kate Green: Of course, my right hon. Friend proposed a full review of the overall impact of the Government’s provisions on child care. Naturally, a full review would be informed by the fullest possible input from experts in the field, including child care professionals and providers, families and even children and young people. I certainly am not aware of any such consultation or discussion.
	It would have been very useful if the Government had carried out such a consultation, because they would have begun to understand the impact of this provision not just on individual families but on the child care market. The impact of clause 35 on the child care market is just as important an issue because of the wide social and economic consequences that it will have for the Government. I am confident that a proper consultation at this point, taking account of the economic context and the other financial measures brought forward by the Government in the emergency Budget, the spending review and this year’s Budget, would produce useful input from experts and families on the pressures and stresses that would be faced, and on the consequences they would have, not least on the propensity to take, extend or remain in paid work. I think we can all agree that paid work will be key in getting our country out of recession, and into recovery and economic growth.

Geoffrey Robinson: Listening to my hon. Friend, it is clear that she has an in-depth knowledge of this sector and of how child care can most effectively and cost-effectively
	be used. Reflecting on her experience, does she see any economic rationale or moral principle underlying the idea inherent in clause 35 that if only one parent is working and is in the higher rate tax bracket, they are not eligible for child care, but if two parents are working, they are? That seems to be a perverse incentive. All it will do—this is why some Labour Members had reservations about our Government’s policy, which led to clause 35 —is to put higher rate taxpayers in the same position with child care as they choose to be with comprehensive schools, whereby they do not bring their middle-class, extreme commitment to them. We will force them out of the national provision of child care and create social division as opposed to greater social cohesion.

Kate Green: I am confused by the Government’s direction of travel, specifically on the clause and on its interaction with their other choices about financially supporting parents to make or not to make decisions about child care, such as whether both parents in a couple go to work or whether one parent stays at home to care for the children—the Government’s preferred model that we seem to see in the development of universal credit and the different treatment of lone parents and parents in couple households, as well as in the differential support that the Government want to provide for child care that is targeted at the most vulnerable people. We might say that clause 35 is part of that package.
	The Government have welcomed the work of my right hon. Friend the Member for Birkenhead (Mr Field), who suggested that bringing all children within the ambit of Sure Start, for example, is good for communities, families and children, so I am also confused about the philosophical direction of travel that the Government are taking in relation to child care. Indeed, I am forced to conclude that there is no philosophical direction of travel. There is entirely opportunistic fiscal decision making—grab a bit of money here, take a bit of money there, forget those families over there—that might save the Government some money in the short term, but it will be absolutely disastrous in the long term for our economic future and for children’s outcomes.

Grahame Morris: I wonder about the specific impact of clause 35 on bankruptcy and personal insolvency, given the loss of tax credits for middle-income families who will be faced with quite considerable personal burdens. That is part of the transfer of debt from the state to the individuals in low-income families, as highlighted by my hon. Friend and by my hon. Friend the Member for Walthamstow (Stella Creasy). The Insolvency Practitioners Association highlights the rapid increase in the number of personal insolvencies and bankruptcies, and perhaps the increasing cost of child care will be a factor—

Nigel Evans: Order. Interventions must, by definition, be short. That was wide of the mark and does not need a response.

Kate Green: We are aware of the difficulty in planning the paying for child care. Parents are often required to pay a lump sum at the beginning of term or for a group of sessions. They are often required to pay for sessions that they subsequently cannot use for various reasons, but there is no money-back guarantee. Parents will
	often pay for sessions for more than one child, but there is no financial advantage to them; there is regrettably no bulk discount when buying child care.
	Removing money from parents that they could have used to meet some of the burden and the lumpiness in the structure of the way that child care charges are often levied will be a real financial burden on family budgets. Some families will take on debt to meet those commitments, because parents will always try to put their children’s best interests first. If they are happy with their current child care setting, they will do all that they can to keep their child in that stable child care place.
	Even if parents are worried that they might be unable to afford that place because of the loss of the tax advantage but can see a time coming when they could resume paying for that place, they will none the less not want to give up that child care place. If they think that they can afford the place again in six or 12 months’ time because their economic prospects might improve, they will stagger on through those six or 12 months, desperate to keep their child in that child care place for two reasons. First, they know that child care places are like gold dust and that, if they give one up, they might not get one back again very easily. That is certainly the case in some parts of the country. Secondly, they know that it will be good for the child. If a child is thriving, doing well and prospering in a settled, high-quality child care place, a parent will make all sorts of sacrifices elsewhere to sustain that child in that place.

Andrew Gwynne: My hon. Friend has hit the nail on the head. Is not the underlying impact of clause 35 that the Government know that, although the allowance will be taken away from higher-rate taxpayers, many of those parents will still fund those places and make sacrifices elsewhere in their family budgets?

Kate Green: That is right. There is plenty of evidence that parents, especially women, will always make financial sacrifices for their children’s well-being. We should be concerned by the fact that families will have to stagger under considerable financial pressure for the best of reasons—to keep their children in good-quality child care places. They know that that will help their children’s well-being, because they will be happy and enjoy their child care setting and the friendships and relationships that they make there. Let us not underestimate the importance of social interaction in child development, and good-quality child care can offer that.
	Parents will do everything they possibly can in the interests of their child’s well-being and happiness. They will do everything to hold on to a good-quality child care place, even if they find themselves under financial pressure, possibly for a prolonged period. That has a knock-on effect elsewhere in the family budget, which might lead to the problems of debt, financial difficulty and stress that my hon. Friends have mentioned.
	Financial stress among parents tends to feed back into children’s well-being, and children become aware of it in the household. They are aware of tensions and anxieties in their parents’ attitudes and behaviour. We have to understand how central good-quality, sustainable and stable child care is to children’s much wider well-being.
	That is why it is of concern that funding for that child care provision is being eaten away at by the provisions of clause 35.
	There are opportunities to compensate for what is happening within the market. I particularly highlight the need to ensure that we maintain a supply of well-qualified child care workers, because pressures elsewhere in the public finances may mean that we see fewer good-quality child care workers coming through from training. Indeed, the loss of education maintenance allowance may have an impact on that. There are real concerns among parents about the nibbling away at the different pillars of the child care market.
	When we ask parents what they worry about in balancing the family budget, they repeatedly highlight the high cost of good-quality child care. They do not want to buy poor-quality child care if it is at all possible to avoid it, because they are mindful of the value of getting their child into a high-quality, professionally run child care setting with excellent developmental and social activity, which the children can enjoy and in which they can flourish. Parents know that quality costs, and they do not want to compromise or cut corners when it comes to their children’s well-being, so they want to spend all they can on quality care.

Geoffrey Robinson: Does my hon. Friend agree that one of the encouraging things that took place under the previous Government was that the quality aspect of Sure Start and child care provision was emphasised right from the beginning? Expansion was not allowed to go unchecked—it could only follow the existence of quality. That high quality has, on the whole, been maintained, but of course it is now under threat from the cuts.

Kate Green: We are worried about whether the quality of child care will be maintained as less funding becomes available in the child care market. Achieving quality is partly about ensuring that children from mixed backgrounds—

William McCrea: Order. The hon. Lady is aware that Mr Evans has drawn her attention to the narrow nature of the clause. I am sure that she would like to get back to the clause as soon as possible.

Kate Green: Of course, Dr McCrea. I was simply going to make the point that quality is partly about diversity and about children from a range of backgrounds and settings being able to meet, play and learn together. One of the consequences of clause 35 is that we will see less of that.
	There are a lot of stresses and pressures on the financial support for the child care market, and they will also be felt in families as parents struggle to pay what is typically a very substantial proportion of their regular monthly outgoings. Child care takes a big bite out of the family budget. I am sure all hon. Members are familiar with parents who say, “It’s almost not worth my while going back to work by the time I’ve paid my child care costs,” but those parents want to go back to work, because they recognise that that is in their long-term interest and that of their children. It is also important to our national economy that parents continue in the workplace.
	Parents accept that a substantial chunk of the gain from earnings could go towards meeting their child care costs. It is none the less incumbent on us to do all we can to mitigate the effects of meeting those high child care costs by ensuring that we put as much public funding into child care provision as we possibly can. I am therefore very concerned that the single effect of the clause is to take public money out of child care provision. Obviously, that will have many, widespread and damaging effects on the child care market, but in due course, it will also have those effects on children’s well-being, and ultimately on economic growth.
	The Government have taken a decision of the previous Labour Government—a decision that was taken with regret and reluctantly, but none the less necessarily in the current economic context—to remove a tax break from some families. However, I very much regret that the current Government have not redeployed that financial gain elsewhere into a marketplace that is essential to our future economic growth and to our children’s well-being, both during their childhood and right through to adult life.
	Frankly, I am shocked that we can be so casual about sustaining hard-fought for, hard-won public investment in child care. It took my hon. Friends a long time—certainly all of my adult lifetime—to give child care any credibility in the public finances. I pay tribute to my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who did an enormous amount of work on that, going back to the 1980s. It is greatly disappointing that the gains that took 20, 25 and 30 years to make are being unwound so quickly, in a matter of months.
	That is why I cannot support clause 35, or indeed any other aspect of the Bill, and why my right hon. and hon. Friends will fight hard to reinstate funding to the child care market at the level that we got it to. I am grateful for the opportunity to come to the Committee today to speak up for our children.

David Gauke: Clause 35 makes changes to ensure that all recipients of employer-supported child care who joined schemes on or after 6 April 2011 receive the same amount of income tax relief as basic rate taxpayers. After all the talk about the attack on universality, it is worth pointing out that clause 35 ensures that everyone receives the same amount of income tax relief as basic rate taxpayers.
	Reform of this provision was announced in 2009 by the previous Government. One might therefore have expected the Labour party to support the measure. When the right hon. Member for Delyn (Mr Hanson) spoke, it seemed likely that they would do so, but then we heard clearly and unambiguously from the hon. Member for Hackney North and Shoreditch (Ms Abbott) that she would oppose it—of course, she is a Front Bencher and a leading light within the Labour party, and she very nearly became its leader. The hon. Member for Easington (Grahame M. Morris), in a lengthy speech, condemned the measure, although he may in fact have been talking about another measure altogether, and the hon. Member for Denton and Reddish (Andrew Gwynne), in an important speech—his word, not mine—also set out his opposition.
	It is striking that the Opposition are now walking away from a proposal of the right hon. and absent
	Member for Kirkcaldy and Cowdenbeath (Mr Brown) and a policy of the previous Government, just as they walk away from any attempts at economic credibility.

David Hanson: rose —

Diane Abbott: rose —

David Gauke: I shall give way first to the hon. Lady.

Diane Abbott: For the record, I am the hon. Member for Hackney North and Stoke Newington, not for Shoreditch, and I came this close to being leader of the Labour party. [Laughter.] Yes, this close! Perhaps the alternative vote system would have done it for me—who knows!
	Of course we supported the proposal made by the outgoing Labour Government, but as we have said throughout this important and illuminating debate, we did so only in combination with the redistributive measures in relation to child care for two-year-olds.

David Gauke: I look forward to seeing how Hansard transcribes, “this close”. I should point out, however, that the hon. Lady did stand under AV, and her votes probably contributed to the final result, so she can be pleased with that—we certainly are.

David Hanson: I want to make it clear to the Minister that I have said from the Dispatch Box that this measure had the support of the previous Labour Government, but it had that support on the basis, first, that through the funds saved it would provide child care places to the poorest in our community, and, secondly, that there would be no cuts to, or freezing of, child benefits. That support was also given in the context of the other measures that my hon. Friends have outlined today. There is a difference.

David Gauke: That is very clear, and I am grateful for that intervention. Clause 35 will result in a saving to the taxpayer of £100 million per year, because higher and additional rate taxpayers will no longer receive beneficial treatment. That target would not be met if the clause was defeated. The Opposition’s position is therefore very clear: they would spend this money on child care. That is an additional spending commitment that we will add to their considerable total of spending commitments. I understand that all additional spending commitments from the Labour party have to be cleared by the shadow Chancellor and the Leader of the Opposition, so I am sure that they have gone through that process. However, we note that additional spending commitment. We believe that we need to get the deficit down. I am sorry that the Labour party does not accept that, or at least does not have proposals to do it. We note also that even in this time of financial crisis in the public finances, it is making additional spending commitments.

Kate Green: It is not an additional spending commitment; it is a commitment to moving spending from one group of families to elsewhere in the child care market. However, will the Minister tell us what assessment he has made of the long-term economic impact of moving parents out of the workplace because of this cut?

David Gauke: Because of the crisis in the public finances that we inherited, we have taken a range of measures to provide credibility and to get our deficit down. That is
	what the country needs, and I am sorry that the Labour party is not willing or able to engage sensibly in that debate.
	Employer-supported child care allows participating employers to offer their employees support with their child care costs. The latest HMRC modelling suggests that about 450,000 parents are members of ESC schemes, and that about 40% of them are higher or additional rate taxpayers. This support is offered through tax relief and the associated national insurance contributions disregard, with employers able to offer their employees up to £55 per week, free of income tax and NICs. Most employers offer this support through child care vouchers delivered either by salary sacrifice or flexible remuneration arrangements. Such arrangements can also benefit employers, because they, too, make NIC savings. At present, basic rate taxpayers can receive up to £900 of support a year through ESC, whereas higher rate taxpayers can receive up to £1,200 of support a year.

Geoffrey Robinson: What is the economic rationale or moral principle underlying the distinction the Government are still making, I think, between families with a single higher rate taxpayer and families in which the mother and father are both higher rate taxpayers? It does not seem to make any sense, moral or economic.

David Gauke: In part, the hon. Gentleman is trying to draw me into the debate on child benefit, but I have no intention of straying off the subject, Dr McCrea. I am sure that you would not want me to. I should also point out that the previous Government’s original proposal was to abolish employer-supported child care altogether. I would be interested to know what the moral principles were at that point.
	The clause introduces schedule 8, which makes changes to ensure that from April this year, all recipients of employer-supported child care will receive the same amount of income tax relief as basic rate taxpayers. Although we are very much in favour of employers helping their employees share the cost of child care, it is neither progressive nor well targeted for wealthier households to derive more benefit than those on lower incomes, and I am rather surprised that Opposition Members should advocate that. All parents who join ESC schemes on or after 6 April 2011 will now receive the same amount of income tax relief as basic rate taxpayers. That is achieved by limiting the amount that higher rate taxpayers and additional rate taxpayers can receive each week to £28 and £22 respectively, so that all parents receive the same amount of income tax relief support each week—about £11. To avoid the measure having a retroactive effect, all existing members who joined a scheme before April 2011 will be able to retain their current rates of tax relief. I assure the Committee that the change will not affect the tax and NICs relief available for workplace nurseries.
	We understand how valuable the support is to working parents. However, it is simply not fair that wealthier parents should be able to receive up to £300 more support for their child care costs than basic rate taxpayers. The changes that we are making to employer-supported child care are needed to make the benefit fairer, better targeted and more progressive, and I commend the clause to the Committee.

David Hanson: I am sure that we will be drawing to a conclusion shortly, but I want first to place on record my thanks to my hon. Friends the Members for Easington (Grahame M. Morris), for Hackney North and Stoke Newington (Ms Abbott), for Denton and Reddish (Andrew Gwynne), for Coventry North West (Mr Robinson), for Stretford and Urmston (Kate Green) and for Leyton and Wanstead (John Cryer) for their contributions. They have highlighted the concerns that we have expressed by asking for the clause to be debated today. Those concerns were summarised in the points that we made at the beginning. The Minister has not really answered those points to our satisfaction, although I will not press the clause to a vote today, because as I have said to him, whatever—[ Interruption. ] I am grateful to the Under-Secretary of State for Education for his contribution. It is good to see him here. Perhaps he would like to answer the questions that the Minister has not answered about why this Conservative Government have refused to invest those resources in child care provision for the poorest in our community, as the previous Labour Government planned to do.
	The key question in this debate is about that very issue. When the Labour Government originally produced clause 35-type proposals, we were investing those resources in helping poorer families with child care, at a time when wider considerations about child tax credits, child benefits and the pressures of family life were not on the agenda, as my hon. Friends said. Clause 35 ties down an anomaly, which the official Opposition think is the right thing to do in the current circumstances—not as a spending commitment, but as a supportive measure for the Minister—just as we believed it was right in previous circumstances. The previous Labour Government’s financial commitments and budgeting planned for that investment to be used to support wider child care. This Government have reneged on that promise.
	We will look in detail at schedule 8, which clause—[ Interruption. ] [Hon. Members: “Clause 35.”] I am sorry, Dr McCrea, it has been a long 24 hours. Clause 35 brings schedule 8 into effect. When we reach schedule 8, we will make a decision on whether to support the proposals put forward by the Minister today. With those few comments, I thank my hon. Friends for raising important issues about the impact of the measure on already hard-pressed families. I will allow the Minister the opportunity today to have his clause without a Division, but we will return to schedule 8 in due course.
	Question put and agreed to.
	Clause 35 accordingly ordered to stand part of the Bill.
	The  Deputy Speaker resumed the Chair.
	Bill (Clauses 4, 7, 10, 19, 35 and 72), as amended, reported, and ordered to lie on the Table.

Business without Debate

DELEGATED LEGISLATION

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Patents

That the draft Patents County Court (Financial Limits) Order 2011, which was laid before this House on 16 February, be approved. —(Jeremy Wright.)
	Question put and agreed to.

Nigel Evans: With the leave of the House, we shall take motions 4 and 5 together.
	Motion made, and Question put forthwith (Standing Order No. 118(6)),

Pensions

That the draft Pensions Appeal Tribunals Act 1943 (Armed Forces and Reserve Forces Compensation Scheme) (Rights of Appeal) Regulations 2011, which were laid before this House on 22 March, be approved.
	That the draft Pensions Appeal Tribunals Act 1943 (Time Limit for Appeals) (Amendment) Regulations 2011, which were laid before this House on 22 March, be approved.—(Jeremy Wright.)
	Question put and agreed to.

BUSINESS OF THE HOUSE (9 MAY)

Ordered,
	That, at the sitting on Monday 9 May, paragraph (2) of Standing Order No. 31 (Questions on amendments) shall apply to the Motion in the name of Edward Miliband as if the day were an Opposition Day; proceedings on the Motion may continue, though opposed, for three hours and shall then lapse if not previously disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Jeremy Wright.)

ADJOURNMENT (WHITSUN, SUMMER AND CONFERENCE 2011)

Motion made, and Question put forthwith (Standing Order No. 25),
	That this House, at its rising on Tuesday 24 May 2011, do adjourn till Tuesday 7 June 2011; at its rising on Tuesday 19 July 2011, do adjourn till Monday 5 September 2011; and at its rising on Thursday 15 September 2011 do adjourn till Monday 10 October 2011.—(Jeremy  Wright .)
	Question agreed to.

Rights of Adoptive Parents

Motion made, and Question proposed, That this House do now adjourn.—(Jeremy Wright.)

Mark Pawsey: I am pleased to have been able to secure this debate to consider the rights of adoptive parents. In respect of the adoption of children, we hear a great deal about the children involved, about what is best for them, and about how to provide them with stable and happy upbringing. Given the need to protect such children, who are often very vulnerable, it is right and proper that they should remain the main focus of attention. We also hear a great deal about the rights of the birth parents, particularly when they wish to have access to those children, but we hear rather less about the parents who adopt such children. They are often people who have given up a substantial proportion of their lives to provide a stable home and family background to children who are in desperate need of love and support. We must not forget that group of people and the unique set of challenges that they face.
	I hope to raise a number of the issues that affect adoptive parents. These include: the confidentiality of information relating to adoption; the way in which a birth parent, often years after an adoption has taken place, is able to challenge terms of contact; and the lack of support available to adoptive parents in difficult circumstances. As with many issues raised in the House, I learned about this subject when I was visited by a constituent at one of my surgeries, a lady whose family is engaged in a complex legal case involving her adopted daughter.
	The Minister and I have already corresponded about this case, and I have similarly contacted the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly) in respect of matters relating to legal aid that I shall talk about in a moment. Following the family’s wishes, they will remain anonymous in the debate. I will do my best to explain the elements of this rather complicated case, which raises a number of issues.
	The first issue relates to the security of data in matters of adoption. In the case to which I am referring, the birth mother was just 13 years old when she gave birth to her child. Both mother and child—the mother came from London—were put into care in London with the original ambition of finding a foster placement for them both. However, professionals in the field at the time quite reasonably decided that, given the mother’s age, the best long-term interests for both lay in putting the child up for adoption. The birth mother, despite her very young age, was reluctant to go ahead with the adoption and wished to keep the child. This wish to retain and gain access to the child has led to many of the difficulties facing my constituent and her family.
	In 2001, my constituent and her family successfully adopted the child, who was just 23 months old at the time; she is now 12. They carried on with family life, and adopted a further child. During these years—pretty happy years from what I understand—the family were keen to do what was right for the child. The contact agreement, which was to facilitate indirect contact with the birth mother through letters a couple of times a year, was honoured; and it continued quite successfully through to 2008. The birth mother’s reluctance to part
	with the child led to concerns that she might attempt an abduction, so the indirect contact did not include the ability to send photographs to the birth mother.
	Given that distance between the birth mother and the parent, one can imagine the adoptive parents’ concern when, seven years after the adoption, when the child was nine, the birth mother arrived unannounced at the family’s home. The question is how the birth mother was able to locate the family. The mother is and was resident in London, and this was an out-of-area adoption, with the child resident some 80 miles away. Clearly, the birth mother should not have been able to find out the name and address of the adopting family without their consent. This was the first of things to go wrong for my constituent and her family.
	This matter also raises questions about the very objective of adoption legislation. As the Minister has confirmed in his recent response to me, adoption legislation is there to provide a framework for protecting confidential information, such as the names and addresses of the individuals involved. That requires local authorities to obtain the consent of the individuals if disclosure is requested. The individuals might be concerned that disclosure could lead to them being identified. In this case, the adopting family had specifically not given such consent. I hope that the Minister will be able to give some guidance in his comments about the security of information in such cases.
	Seeing the birth mother on her doorstep, my constituent attempted to make the best of what was then a difficult situation and sought to avoid a distressing scene in front of the child. She invited the birth mother into her home. She did so on the basis that the birth mother had seen her daughter and that it might affect her adversely if further contact was denied. The adopting family reluctantly felt that they had no choice but to permit ongoing and regular contact. That happened for a couple of years, although it proved extremely difficult when, over time, the birth mother became increasingly aggressive and confrontational about access.
	After a period, the mother’s behaviour became such that the family felt obliged to contact the police, leading to the birth mother receiving a police caution for harassment. With that in mind, the family quite reasonably requested that direct contact should be stopped, as it was starting to have serious consequences on the child who had become afraid of being abducted. The matter became so serious that at one stage the police provided both child and adoptive mother with alarms in case of an attack. One can only imagine the family’s horror when, a few months after contact was stopped, the family received a court summons through the post, advising them that the birth mother was attempting to force direct contact once again. Even more than that, the birth mother had secured legal aid in order to do so.
	That brings us to the issue of the ability of a birth parent to challenge an adoption order. Unfortunately, under the existing rules my constituent and her family—the adopting family—are not eligible for legal aid, but they are also not sufficiently wealthy to afford expensive legal representation. They have been given an estimate of a cost of some £6,000 to fight the case in court, and they have no access to such a sum. I believe that the case
	raises serious issues about the rights of adoptive parents compared with those of birth parents, and about access to legal representation in such circumstances.
	According to the Adoption and Children Act 2002, the effect of an adoption order is to give parental responsibility to the adopters. It refers to the extinguishing of parental responsibility from those who had it previously. Once an adoption order has been made, birth parents cease to have any legal rights over the child, and therefore cannot simply claim him or her back. As I explained earlier, a particular cause for anxiety is the fact that the direct contact came about not as a result of the wishes of the adoptive family, but because the birth mother had somehow managed to locate them.
	Where does that leave the adopting family? They are left feeling that the birth mother has more rights than they have. It surely cannot be right for a birth parent who has breached the agreements of a contact order to be allowed to take the adoptive parents to court in order to make contact. I think most people would feel that in such circumstances the rules seem to be loaded in favour of the birth parents, with a lack of regard for the feelings and treatment of the adoptive family.
	The availability of legal aid to the birth mother has become a matter of real concern to my constituent and her family. I am aware that the Government are currently undertaking a review of legal aid, and have presented proposals that will result in 500,000 fewer instances of legal help and 45,000 fewer instances of legal representation being funded by legal aid annually. I am also aware that family law is the single most expensive area of legal aid. In 2009-10, the most recent year for which figures are available, it cost the taxpayer £597 million. It is therefore understandable that the Government wish to make changes.
	The Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon, has confirmed to me that legal aid is granted on the strength of information provided by applicants and their solicitors. I realise that it is calculated on a means-tested basis and takes no account of previous behaviour, but while I also understand the importance of safeguarding access to legal advice, I feel that in a case such as this the existence of legal aid complicates matters unnecessarily. I therefore welcome the Government’s measures to restrict it, especially in cases such as this in which it pitches one person unfairly against another, and especially when options such as mediation may be more effective. It seems fundamentally unfair that in the case that I have raised, legal aid is available to the birth mother but not to the adoptive parents. I realise that this issue is not within the Minister’s portfolio, but perhaps he will clarify the effect that changes to legal aid provisions will have on cases involving adoption.
	Finally, I want to draw attention to the apparent lack of support measures for adoptive parents. My constituent and her family have been subjected to the behaviour of an aggressive birth mother, and must now deal with a complex legal case without the funds that would enable them to instruct a lawyer. They feel that throughout this time little or no support has been available to them. My constituent feels that she has been left with no choice but to trawl the internet to search actively for advice and guidance from adoption charities. That situation cannot be right, so will the Minister take the opportunity to advise us on what system of support and guidance exists for parents of adoptive children?
	In highlighting this case and the cause of adoptive parents, I wish to make it clear that I do not expect the Minister to comment on this particular case and I simply seek his views on the broader issue of policy. I join my constituent in making the point that the legal importance of adoption orders often seems worthless if birth parents are able to take adopting families to court simply because they decide that they want to have more or full access. I fully appreciate the difficulties facing birth parents, particularly those who may not have wished to give up their child for adoption in the first place, but they should not be allowed to force legal proceedings and wreak havoc on new families who will have worked so hard to provide stability and security for the children they are adopting. If moves are made to encourage more direct contact, more guidance ought to be available for adoptive parents and more support measures must be established for them. I recognise that the law involved in this case is complex and that it is further complicated by the Government’s review of legal aid. They must do all they can to educate both adoption agencies and adoptive families to understand what their position is. However, I accept that the most important factor throughout all these cases is the requirement to facilitate happy and successful adoptions for years to come.
	The case I have described has been most distressing to my constituent and her family. For 10 years they have brought up an adopted child as their own in a happy and stable environment, but it is now one where both they and the child are extremely uncertain about their future together. I recognise that much of this unfortunate situation cannot be changed and that the clock cannot be turned back, but I wish my constituent and her family every success in their legal battle, and the best and happiest future for them and their adopted daughter.

Tim Loughton: I congratulate my hon. Friend the Member for Rugby (Mark Pawsey) on securing this evening’s important debate. It seems that we have been debating for days in this Chamber and he was unlucky enough to draw the short straw of having his debate at the tail end, after a night when some of us have been left short of sleep.
	Leaving aside the specific case behind today’s debate and the correspondence between my hon. Friend, myself, the Department for Education and the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly), to which reference has been made, I know that, like many of us across the House, my hon. Friend the Member for Rugby is a big admirer of the many thousands of wonderful parents in this country who have chosen to adopt a child. His closing remarks absolutely affirmed the nobility of such an activity, and I very much wish to encourage, and have been seeking to encourage, it in my time as the Minister with responsibility for adoption and children in care.
	My hon. Friend raised several crucial issues and I wish to address as many of them as possible because, as he knows, adoption is an issue on which the Government have been working extraordinarily hard over the past year. As he said, I cannot refer to the specific case of his constituent because it is before the courts. It is clearly a
	difficult case and it has been going on for some time. As he says, the child has been placed with the adoptive parents for some 10 years and that child is regarded as their own. He was also right to mention the oft-referred-to rights of children that are at the heart of the Children Act 1989. The welfare of the child must be the paramount consideration when dealing with any matters to do with children in the care system. He also mentioned that we hear, quite rightly, about the rights of birth parents. Only in extreme circumstances should a child be taken away from their birth parents and the process should end in adoption only when it is not safe for that child to be returned to the birth parents or parent.
	Most importantly, perhaps, we have made it clear from day one that we have a lot of work to do to get an adoption system that is truly fit for purpose. I have been coming at it from the angle of wanting to ensure that we have more adoptions as well as speedier and smarter adoptions, but I am also conscious that we must ensure that we get the right adoptions. The right children should be adopted and everything should be done to restore children to their birth families wherever possible.
	My hon. Friend raised quite an interesting scenario that falls in between those two points, in which parents had come forward as adopters, were confirmed in that role and took on a child as their own, but their position was challenged at a later date after which legal action was brought to bear on them. Such a situation is quite unusual, but he has certainly made me aware of such cases and in formulating our approach to adoption, I want to take them on board. If we are to promote adoption as providing a suitable home for a number of children who were not lucky enough to be able to be brought up with their birth parents, it is crucial that we ensure that there are safeguards so that the right children are placed for adoption and the people who adopt them have their interests protected, too. After all, they have come forward with the noblest of intentions. We need an adoption system that is truly fit for purpose in all those respects.
	No one could fail to be concerned by the fall in the number of adoptions of looked-after children over the past few years, particularly the decline in the timeliness of placements. When it has been decided that a child’s future best lies in an adoptive placement, we owe it to that child to get on with placing them as swiftly as we can so that they have as good a chance as possible to secure a second chance at the stable family upbringing that was denied to him or her in the first place.
	At this stage, I would particularly like to commend the campaign that has recently been promoted by The Times and, in particular, by the journalist Rosie Bennett, who has highlighted a lot of the shortcomings in the adoption system and has worked with us in the Department for Education to try to highlight the problems and to promote some of the solutions. We are working with a number of organisations and people who are interested in the field of adoption.
	As I have said before, both in the House and outside it, we want to see the decline in adoption stopped in its tracks and more children adopted quicker and more smartly when that is in their best interests. I also want local authorities to consider carefully the support that adopted families need—my hon. Friend mentioned that—so that everything possible is done to increase the number of successful adoptions. It is not just a question of getting more adoptions to happen; adoptions must be
	sustainable and they must not break down. It is all the more important that we get a good match and that the right support is provided at an early stage and for as long as it takes so that everything possible is done to increase the number of lasting and successful adoptions.
	Placing a child for adoption with prospective adopters is only the start. Adoptions need to succeed and that is why I set up a ministerial advisory group on adoption. At our next meeting we will consider adoption breakdowns and how better adoption support can help to prevent them. As part of a wider programme of adoption reform, we have recently published revised national minimum standards, revised statutory guidance and an adoption data pack to inform and stimulate debate both nationally and locally about the volume and timeliness of adoption.
	In addition, as many hon. Members will know, we have asked David Norgrove to review the family justice system. The review panel’s interim report, which came out just last month, provides a valuable initial assessment of the challenges that the family justice system faces. We encourage everyone who has experience of the system to contribute their views over the coming months so that the panel has as much information as possible on which to base its final recommendations, which are due out later in the year. I have also had very productive discussions with Sir Nicholas Wall, the president of the family division, and I will be holding further discussions with judges and members of the judiciary who are involved in adoption.
	To come back to the specific circumstances outlined by my hon. Friend, the Adoption and Children Act 2002 makes it quite clear that in reaching a decision about the adoption of a child, the paramount consideration of the court or adoption agency must be the child’s welfare. In reaching a decision, the court or agency must take into account a number of issues, including the likelihood of any relationship with birth family relatives continuing, as well as the benefits to the child, and it must have regard to the child’s ascertainable wishes and feelings. I know from some of my constituency cases that ongoing contact with birth parents is a difficult and sensitive issue; great sensitivity and, often, the judgment of Solomon, is required.
	As my hon. Friend knows, during the period between a placement order and an adoption order, the adoption agency must satisfy itself as to the child’s welfare and consider any additional requests for support by the adoptive parents. Once an adoption order has been made, adoptive parents are in exactly the same position as birth parents, but adoption support services are available. An adoption order is, of course, final and irrevocable, other than in exceptional circumstances. The courts have consistently emphasised the special, permanent nature of adoption orders because they affect people’s status and alter the most fundamental of human relationships. However, the High Court has the power to set aside an adoption order on appeal in cases of mistake or where there has been a failure of natural justice due to procedural irregularities or fraud, but that is extremely rare and is to be avoided if at all possible as it is greatly unsettling for the child.
	Children, adoptive parents and birth family members all have the right to an assessment of their needs for adoption support services on request and it is for the
	local authority to decide what services to provide. Sensitive, proactive post-adoption support can sometimes make all the difference to the success of an adoption. Having looked at the record of some independent adoption agencies in particular, I know that it is invariably those agencies that offer good pre-adoption placement support and good-quality post-adoption support for as long as it takes to make sure that the adoptive placement is sustainable and able to last that tend to have the lowest disruption rates and the best records of giving children a decent second chance. The cost of not providing such support, in terms of children returning to care, can be very great in financial terms and, more importantly, in the human and social effects for the children involved.
	There is a legal framework under the 2002 Act that protects the identity of the adopted child and the adoptive family. My hon. Friend rightly raised the important issue of security of information for adopters and I would be interested to hear how the case he has discussed evolves and to learn where security breaches might have happened, because it is essential that the anonymity of new arrangements is paramount. If there are flaws in the system that enable people to exploit it in a way that is not in the best interests of the child, we need to be able to do something about that. We need to be able to identify such problems and I would appreciate further discussions with him as the case he mentioned is unravelled.
	No information should be disclosed that would reveal the child’s identity or whereabouts or the identity or whereabouts of the adoptive parents. Although there are safeguards in place, in today’s electronic world a determined person with little information about an individual might be able to find them, but that is no excuse for our not having in place systems that are as watertight as possible.
	As regards contact after adoption, my hon. Friend will know that before a child is placed for adoption, the adoption agency must assess the needs of the child in relation to future contact arrangements with members of their birth family. It must ascertain the wishes of the child, birth parents and any other person whom the agency considers relevant about future contact. As I said, that is a sensitive and difficult area. Contact plans are reviewed at the various stages of the adoption process, and are considered by the court when making a placement order and an adoption order. It is not something that is static—it is constantly assessed and reassessed.
	It is important that adoptive parents are made aware that, as part of the support services available to them, they can receive help in relation to any contact arrangements and, like the birth family and of course the child in question, the adoptive family can ask the adoption agency that placed the child to review the contact arrangements if they are not working or if the child’s needs for contact have changed. That is not uncommon as the child grows up and begins to ask questions about his or her origins. I must emphasise that once an adoption order is made, a birth parent has no automatic right to contact, and can only make an application to the court for an order for contact with the court’s permission. The court may make a contact order requiring the person with whom the child lives or is to live to allow the child to visit or stay with the person named in the order, or for that person and the child otherwise to have contact with each other. It bears repeating that a court will do so only if, having weighed the evidence, it is clear
	that such contact would be in the child’s best interests. The paramountcy consideration always comes into play. The revised adoption guidance that I mentioned earlier covers those matters.
	It is worth noting that if adoptive parents are unhappy with the way in which they have been treated by the local authority they have the right to make a formal complaint under the local authority complaints procedure. If they are unhappy with the council’s response, they may request a panel hearing, which will have independent representation. If they remain dissatisfied, and think that a local authority has treated them unfairly as a result of bad or inefficient management—“maladministration”—they can refer their complaint to the local government ombudsman.
	My hon. Friend mentioned legal aid, and I am aware of his correspondence with the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon. I will not deal with the detail of that issue, but he is right to refer to the review. It is worth noting, however, that the legal aid review is intended to achieve a level playing field for various aspects of family justice, as that is clearly not the case at the moment. Legal aid changes might affect adoption in some cases, but I am happy to take another look at that if, in the light of my hon. Friend’s case, he thinks that there is not a level playing field, and I am happy to take part in discussions with my colleagues at the Ministry of Justice.
	The Ministry of Justice recently consulted on changes to the legal aid system, with the aim of focusing resources where they are most needed, and it is currently considering a response to the consultation, so its final judgments are a little way off. Decisions about legal aid funding in civil cases are a matter for the Legal Services Commission, which is responsible for administering the legal aid
	scheme. Generally, legal aid in civil cases is available to anyone who qualifies, provided that the applicant is using the courts of England and Wales and that the case is within the scope of the scheme. Civil legal aid is available for cases involving the welfare of children. Each application, which may include the child if they are a party to proceedings, is considered on an individual basis and is subject to statutory tests of the applicant’s means and the merits of the case.
	Let me finish by repeating our absolutely, intently serious commitment to improving adoption services in this country, in particular to those people who come forward to provide loving and supportive homes to children who desperately need the second chance that they were denied with their own parents. With the wider reforms that we are introducing, we want to get people talking and thinking about adoption again, and we want all that to translate into action, with better-quality, sustainable placements right across the country. If there are examples from this case and others that hon. Members wish to raise that show in some way that the ability of adoptive parents, who have often gone through a long, drawn-out and intrusive process, to continue to offer a stable, loving family placement to an adopted child is impaired, we will need to look at that, and I am happy to review the situation if that is the case. I am grateful to my hon. Friend for raising the issue, and I hope that his constituent’s case, which is behind today’s debate, reaches a satisfactory conclusion. Equally, if there are important lessons to be learned that we can apply to the whole area of adoption, I should very much like to learn them.
	Question put and agreed to.
	House adjourned.

Deferred Division

Section 5 of the European Communities (Amendment) Act 1993

That this House takes note with approval of the Government’s assessment as set out in the Budget Report, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook, which forms the basis of the UK’s Convergence Programme, for the purposes of section 5 of the European Communities (Amendment) Act 1993.
	The House divided:
	Ayes 249, Noes 139.

Question accordingly agreed to.